Policy Briefs

15 years of the carbon market: six lessons for strengthening the system

Published on 14 April 2021

By Christian de Perthuis

This Policy Brief was initiated by a joint request from Confrontation Europe and the ID4D blog (Agence Française du Développement), which I would like to thank. It was written in complete independence and Its conclusions are solely those of the author.  

  1. Setting the cap: tighter constraint needed! For 15 years, the emissions cap has been based on non-binding climate targets. The move to a 55% reduction target in 2030 compared to 1990 provides a historic opportunity to strengthen the emissions trading system.
  2. Governance: where’s the pilot in the event of turbulence? To ensure that the market can be managed in the face of unforeseen events and to ensure the transparency of the CO2 price trajectory, an independent authority would have the power to allocate and withdraw allowances in the same way as a central bank.
  3. The scope of the scheme: time to change gear! From 2023 onwards, the emissions trading scheme should cover all CO2 emissions linked to the use of fossil fuels (including international transport) and industrial processes.
  4. The allowances bonanza: how should the carbon rent be redistributed? The strengthening of the system will lead to an increase in carbon rent. From 2023 onwards, it would be possible to return almost €400 to each EU citizen from this rent to support them in the low-carbon transition.
  5. When the system subsidises fossil fuels: hands off my allowances! In order to support the industrial sectors subject to allowances in the transition and to strengthen their competitiveness, it is crucial to put an end to the free allocation of allowances.
  6. Protecting the border: the art of inclusive levies. Behind the technical debate on the border adjustment mechanism there lies a major political question: how can the EU convince its partners that it is now time, by extending carbon pricing, to make free trade conditional on higher climate standards?

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🇫🇷 Article ID4D Plafond d’émission du marché carbone: fixez moi une contrainte!