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The European Commission's recent legislative proposals signal a robust commitment to achieving climate neutrality by 2050, with an interim target of a 55% net reduction in greenhouse gas emissions by 2030. Central to this effort is the revision of key EU climate legislation, including the EU Emissions Trading System (EU ETS). Here's a summary of the key elements and implications of Phase 4 of the EU ETS:
- Emission Reduction Targets: Phase 4 (2021-2030) continues the trend of reducing emissions annually, with an increased linear reduction factor of 2.2%. This ambitious trajectory aligns with the EU's broader climate objectives.
- Cap on Emissions: The EU sets a cap on the total volume of greenhouse gases that can be emitted by covered sectors. This cap decreases annually, ensuring a steady reduction in emissions over time.
- Auctioning and Free Allocation: Around 57% of the Union-wide cap is auctioned, with the remainder provided for free. This balance aims to incentivize emission reductions while safeguarding the competitiveness of industries vulnerable to carbon leakage.
- Special Considerations: Certain Member States, including Bulgaria, Hungary, and Romania, have opted to allocate free allowances to the energy sector up to 2030, under Article 10c of the ETS Directive, reflecting diverse national circumstances.
- Aviation Sector: The rules for setting the aviation cap remain consistent with Phase 3, with a bottom-up approach determining the allocation of allowances. From 2021 onwards, aviation allowances also adhere to the 2.2% annual reduction factor.
- Accreditation and Verification: The EU ETS Accreditation and Verification Regulation (AVR) establishes stringent requirements for the verification of emissions data, ensuring transparency and reliability in reporting.
- Mutual Recognition: Verifiers are permitted to operate across national borders, enhancing flexibility and efficiency in compliance processes while maintaining rigorous standards.
In support of the implementation of the EU ETS Accreditation and Verification Regulation (AVR), EC published a non-legally binding Explanatory Guidance which covers the following topics:
- Regulatory Framework: The AVR, alongside the Monitoring and Reporting Regulation, provides the legal framework for accreditation and verification processes, replacing outdated guidelines and reflecting evolving climate priorities.
- Guidance Suite: A comprehensive suite of guidance materials, including explanatory documents, key guidance notes, and specific guidance for aircraft operators, supports stakeholders in navigating AVR requirements effectively.
- User Manual: Chapter 2 serves as a user manual, clarifying roles and responsibilities across the compliance chain for operators, verifiers, accreditation bodies, and other relevant parties.
- Verification Process: Chapter 3 outlines the verification process, emphasizing the objective of ensuring accurate emissions and tonne-kilometre data reporting, guided by strict verification principles and obligations.
- Small Installations: Chapter 4 provides tailored guidance for verifying small and simple installations, ensuring verification activities meet specific needs while maintaining rigorous standards.
- Accreditation and Oversight: Chapters 5 and 6 establish requirements for verifier accreditation and ongoing monitoring by National Accreditation Bodies, guaranteeing the quality and integrity of verification processes.
- Peer Evaluation and Information Exchange: Chapters 8 and 10 facilitate peer evaluation mechanisms and harmonized information exchange, enhancing transparency and accountability in EU ETS compliance.