Policy Overview

The EU Emissions Trading System Directive 2003/87/EC (EU ETS) governs the world’s largest carbon market: a cap-and-trade system covering key energy intensive sectors, accountable for 41% of EU emissions. In light of the European Green Deal and the EU’s new 2030 GHG target, the EU Commission proposed extending the scope of the EU ETS to expand carbon pricing to cover more of the European economy in September 2020, and a public consultation was launched to gather stakeholder views in October 2020. The review will consider extending the EU ETS to new sectors, including the road transportation sector, the buildings sector and the maritime transportation sector, and to all international flights for aviation, as the scope is currently limited to intra-EU flights.

Policy Making Mixed Progress

After intense negative lobbying from the aviation sector, the EU Commission proposal to reform the ETS for aviation did not extend the scheme to international flights, but the proposed extension to the maritime sector has been maintained despite fierce opposition. A standalone ETS for road transportation and buildings aligns with advocacy from heavy industry. The EU Parliament weakened several elements of the Commission’s proposal, including the extension to road transportation and buildings, but strengthened the inclusion of the maritime sector and the EU ETS for aviation.

InfluenceMap Query

Emissions Trading

Policy Status

Under consideration: proceeding to trilogues after votes in EU Parliament and Council.

  • European Parliament: Environment (ENVI) Committee
  • Rapporteurs: Peter Liese and Sunčana Glavak (European People’s Party)
  • European Council: Environment Council and Working Party on the Environment

Evidence Profile

13721316413476

EU ETS - Maritime

5250371618

EU ETS - Aviation

7356191519

EU ETS - Road Transport

756547021

EU ETS - Buildings

551543318

European Commission

European Parliament

European Council

Lobbying Overview

Overview of Corporate and Industry Lobbying

The evidence collected on corporate and industry lobbying on the update of the EU ETS shows intense oppositional engagement from the maritime and aviation sectors. However, The utilities and automotive sector were mostly supportive of the extension of carbon pricing to the buildings and road transportation sector.

Long-term Lobbying Trends

The maritime sector engaged in strategic oppositional lobbying on the extension of the EU ETS. Actors including International Chamber of Shipping (ICS) and the European Community Shipowners' Associations (ECSA), vocally opposed the inclusion of the sector in the EU ETS in 2020-21, stressing preference for a global approach to mitigating GHG emissions from shipping.

Energy intensive industry opposed the inclusion of the buildings and road transportation sectors in the EU ETS in 2020-21, advocating instead for a separate EU ETS to be created. This included associations such as FuelsEurope, and cross-sector associations, such as the Federation of German Industries (BDI). Cefic argued that it would “entail a higher CO2 price risk” to industry.

The airline sector actively opposed increased ambition for the EU ETS for aviation in 2020-22, the International Air Transport Association (IATA) consistently opposing any inclusion of aviation in the EU ETS, supporting its replacement with CORSIA. Airlines for Europe opposed extending the EU ETS to cover all international (EU to/from non-EU flights), alongside supporting a hybrid EU ETS and CORSIA scheme to apply to intra-EU flights. Some legacy airlines, including Lufthansa, opposed a reduction in free allowances for the sector, pushed for exemptions for feeder flights from the EU ETS and have been unsupportive of expanding the EU ETS scope to include international flights in 2020.

The majority of the automotive sector has been supportive of the extension of the EU ETS to the road transportation sector, the European Automobile Manufacturers Association (ACEA) and the German Automotive Association (VDA) supporting the move to incentivize the use of low- and zero-carbon fuels in 2020-21. However, progressive actors were unsupportive of the move, in November 2020 Tesla stating that it would cause “policy competition” between the EU ETS and the existing CO2 regulations for light- and heavy-duty vehicles, and advocating for a tightening of these policies instead.

Lobbying on the EU Commission’s proposal since July 2021

Actors across the European economy maintained support for a standalone ETS for the road transportation and building sectors, including the BDI, Eurometaux and RWE. ACEA stated support for revenues from the EU ETS in the road freight transport sector to be invested in low- and zero-emissions vehicles and technologies.

Several entities have taken more positive stances on the ETS aviation reforms since July 2021, Ryanair and EasyJet stating support for the extension of the ETS to all international flights (EU to/from non-EU) and highlighting the need to regulate emissions from long-haul flights. WizzAir supported the inclusion of private jets in the ETS, and was in favor of ending free allowances for the aviation sector.

However, industry associations continued oppositional lobbying, as Airlines for Europe supported retaining free allowances for aviation after 2027, and advocated against the EU Parliament Environment Committee’s proposal to phase out free allowances before 2025 in May 2022. The Airline Coordination Platform advocated for an exemption from the ETS for feeder flights by financially compensating companies affected. The European Regions Airline Association (ERA) supported suspending the ETS for aviation ahead of CORSIA coming into force. Before the EU Parliament Environment Committee vote on the EU ETS, the aviation industry, with particularly intense engagement from Airlines for Europe, advocated that free allowances for the aviation industry should be allocated based on sustainable aviation fuel (SAF) usage.

The maritime sector reaffirmed its opposition to the inclusion of international shipping in the EU ETS. ICS opposed the inclusion of shipping in the EU ETS, instead advocating for the regulation of shipping through a global market-based mechanism. ECSA also appeared to prefer a global approach, but conditionally supported the EU ETS if it only applies to intra-EU scope and a phase-in period that excludes some emissions. However, the World Shipping Coucil (WSC) took a less oppositional stance, recommending that only intra-EU shipping journeys are included in the EU ETS, at least in its initial phase. ECSA proposed that the file should allow shipping companies to opt-out of the ETS by paying a fee to the fund that is equivalent to their yearly emissions.

Lobbying Impacts on Policy Ambition

By considering the potential scenarios in the EU Commission's original Impact Assessment Report for the EU ETS Extension, and comparing this to the final proposal, a gauge of the impact of industry lobbying can be taken. In this case, intense engagement from the aviation sector and heavy industry appears to have led to the adoption of weaker positions by the EU Commission, Council and Parliament. Oppositional lobbying from the maritime sector did not appear to impact the ambition of the proposal.

EU Commission Proposal

  • The EU ETS aviation sector reform: The Commission proposed that the scheme would not be expanded to apply to international flights instead of CORSIA. The proposal saw the free allocation of emissions allowances for the sector phased out by 2027 and reduced the number of allowances auctioned as of 2023 by applying an increased Linear Reduction Factor (LRF) of 4.2% (instead of 2.2%).

  • The extension to the maritime sector: The EU ETS proposal included the maritime sector from 2026 and applied to all intra-EU and 50% of inter-EU journeys. However, the operational carbon intensity standard which was tabled in the impact assessment to accompany the extension, did not materialize.

  • ETS extension to buildings and road transportation sectors: A separate EU ETS, dubbed ETS2, was proposed for these sectors from 2026 applying to fuels used commercially and privately.

EU Parliament Proposal

The EU Parliament’s proposal for the EU ETS extension weakened several elements of the EU Commission’s proposal, but strengthened the extension to the maritime sector.

  • The extension to the maritime sector: EU Parliament proposed to include intra-EU shipping without free allowances from 2024. This extends to international (extra-EU) shipping in 2027 with possible exemptions based on bilateral agreements or third country carbon pricing, a significant increase in ambition compared to the Commission proposal.

  • The extension to road transport and heating: A separate EU ETS for commercial road transport and heating is proposed to be introduced from 2025, not applying to private transport and heating until 2029, alongside a price ceiling. This is a significant weakening of the EU Commission’s proposal.

  • The EU ETS aviation sector reform: The Parliament proposed an enlarged scope to all flights departing from European Economic Area airports from a year after new rules are enforced, with a phase out of free allowances by 2025. However, free emissions permits would be allocated based on industry use of sustainable aviation fuels after 2025.

EU Council Proposal

The EU Council’s proposal slightly weakened the EU Commission’s proposal for the extension of the EU ETS.

  • Extension to road transport and buildings: The EU Council maintained the scope of the extension to road transport and buildings, and implemented exemptions for Member States with national carbon tax systems until 2030 where prices are higher than average ETS2 prices. It also delayed the implementation of ETS2 until 2027.

  • Extension to maritime: The proposal maintained the EU Commission’s proposed scope of 100% intra-EU and 50% international voyages, and did not grant the maritime sector any free allocation of emissions allowances. It staggered the phase in over four years after the new Directive enters into force, and increased the exemptions proposed by the EU Parliament to include islands.

  • ETS for aviation: The EU Council’s proposal maintained the EU Commission’s phase out of free emissions allowances by 2027. The scope includes only intra-EU flights in line with the EU Commission’s proposal. However, the Council proposed compensating for the additional costs due to SAFs with 20 million phased out free allowances.

The EU Council, Commission and Parliament will now enter into negotiations to finalize the legislation in trilogues, with the EU Parliament taking the most ambitious position on the file.

InfluenceMap Query

Emissions Trading

Policy Status

Under consideration: proceeding to trilogues after votes in EU Parliament and Council.

  • European Parliament: Environment (ENVI) Committee
  • Rapporteurs: Peter Liese and Sunčana Glavak (European People’s Party)
  • European Council: Environment Council and Working Party on the Environment

Evidence Profile

13721316413476

EU ETS - Maritime

5250371618

EU ETS - Aviation

7356191519

EU ETS - Road Transport

756547021

EU ETS - Buildings

551543318

European Commission

European Parliament

European Council

Live Lobbying Alerts

Hydrogen Europe appears supportive of EU climate policy

05 July 2022

In a 27th June press release, Hydrogen Europe welcomed the European Parliament position on the EU Emission Trading Scheme (ETS). The association supported the EU ETS extension into the maritime and aviation sectors, and a new scheme for the buildings and transport sectors. It also advocated for coverage of the hydrogen sector in the system. Hydrogen Europe also appeared to support the EU Carbon Border Adjustment Mechanism (CBAM) proposal from the EU Parliament. The group supported the gradual phase out of free allowances from the EU ETS, without specifying a timeline. However, it also called for rebates for exporters by emphasizing risk of carbon leakage. Finally, CEO Jorgo Chatzimarkakis advocated for higher sectoral sub-targets and targets for renewable fuels of non-biological origin (RFNBOs) in the EU Renewable Energy Directive revision, following the EU Council’s position on the policy.

Easyjet and Ryanair's study supports inclusion of international flights in the EU ETS

17 June 2022

On June 8th, Politico reported on a study commissioned by easyJet and Ryanair, which appears supportive of the inclusion of international flights in the EU Emissions Trading System (EU ETS). The report concluded that EU measures applying only to intra-EEA flights jeopardize 73% of emissions savings and encourage passengers to switch to non-EU destinations, while applying regulations to all flights doesn't lead to destination swapping.

Aviation groups clash on expansion of EU Emissions Trading System

23 June 2022

In a June 14th press release, Ryanair supported the expansion of the EU Emissions Trading System (EU ETS) to include flights departing the EEA, as proposed by EU Parliament. Ryanair’s CEO, Michael O’Leary, further described the current intra-EEA scope “absurd, unfair and inexplicable” and called on EU member states and Frans Timmermans to support the Parliamentary vote. However, in a June 9th press release, International Air Transport Association's (IATA) CEO, Willie Walsh, opposed the application of the EU ETS to flights departing the EEA, appearing to argue it may derail decarbonization efforts in faster growing markets outside of Europe. Instead, Walsh supported regulation through CORSIA. Likewise, in a June 8th statement on the EU Parliamentary vote, Airlines for Europe (A4E) appeared to also oppose an extension of the EU ETS to flights departing the EEA, the phase-out of free emissions allowances by 2025, and the inclusion of non-CO2 emissions within the EU ETS. In the statement, A4E welcomed the adoption of Sustainable Aviation Fuel allowances by Parliament.

Airlines for Europe advocates for free allowances for aviation

11 May 2022

According to a May 11th 2022 Politico report, a proposal by Airlines for Europe (A4E) advocated for continued free emissions allowances for aviation under the EU Emissions Trading System, allocated based on Sustainable Aviation Fuel (SAF) usage. The proposal argues the mechanisms would incentivize the deployment of SAFs more than a mandate.

Entities Engaged on Policy

The table below lists the entities found to be most engaged with the policy. InfluenceMap tracks over 350 companies and 150 industry associations globally. Each entity name links to its full InfluenceMap profile, where the evidence of its engagement can be found.

Influencemap Performance BandOrganizationEngagement Intensity
C-Shell63EnergyEurope
CVolkswagen Group54AutomobilesEurope
D-Lufthansa35TransportationEurope
C-Bosch (Robert Bosch)19IndustrialsEU
C-Daimler31AutomobilesEurope
EBaltic and International Maritime Council (BIMCO)21TransportationEurope
C-Eurogas40EnergyEurope
D-Japan Automobile Manufacturers Association (JAMA)28AutomobilesAsia
C-International Business Aviation Council (IBAC)14TransportationProject-Id-Version: PACKAGE VERSION PO-Revision-Date: YEAR-MO-DA HO:MI+ZONE Last-Translator: FULL NAME Language-Team: LANGUAGE MIME-Version: 1.0 Content-Type: text/plain; charset=UTF-8 Content-Transfer-Encoding: UTF-8 Generated-By: pygettext.py 1.5
D-Airlines for America (A4A)32TransportationNorth America