Last week, during the meeting of EU environment ministers, we managed to postpone ETS2, i.e. the fee on emissions in construction and transport, by one year – until 2028.
However, as Krzysztof Bolesta, deputy minister of climate, who is responsible for negotiating climate issues with Brussels, emphasizes in an interview with Business Insider Polska, Poland still maintains its current demand to delay the start of this solution for another two years – until 2030. How does Warsaw want to achieve this goal? Bolesta explains that the opportunity to do this will be the revision of the ETS directive announced for next year.
First, a price control mechanism for emission allowances in construction and transport
The Commission's proposal on how it wants to limit the price of emission allowances in the ETS2 system is expected later this year. At the end of October, it was obliged to do so by the European Council, i.e. the leaders of the EU countries.
— The Commission will probably propose a price control mechanism by the end of the year. However, next year there will be a revision of the ETS directive and this will be the first opportunity to return to the topic of postponing ETS2 to 2030 – says Krzysztof Bolesta.
The revision of the ETS directive is to cover not only ETS2, but also the currently functioning emission charging system in energy and industry, i.e. ETS1. The demands for changes to ETS1 include a slower EU withdrawal from free CO2 emission permits and price corridors for emission permits in the ETS1 system. France proposed the second of these solutions in spring.
As for price limits in the case of ETS2, as Bolesta explained in a recent interview for Business Insider Polska, the mechanism proposed by the European Commission is to consist in the fact that when the price of emission allowances in ETS2 increases above EUR 45 per tonne, additional permits placed in the reserve of emission permits will be activated. [MSR — red.]. As a result, the supply will increase and the market price will fall.
When the proposal to limit prices in the ETS2 system appears on the table, negotiations about its shape will be possible. — We will definitely talk, for now we have a very general proposal. Once specific records of the audit appear, we will sit down and talk. Directionally, of course, we are in favor of it, because we cared about it. However, we will definitely not take anything blindly – emphasizes Krzysztof Bolesta.
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Will Poland make even more far-reaching attempts to abandon ETS2? The ally in this matter is the Visegrad Group (V4) formed by the Czech Republic, Poland, Slovakia and Hungary. Bratislava expresses loud expectations of V4 cooperation against ETS2. At the end of October, Slovak Prime Minister Robert Fico called for the Visegrad Group countries to jointly oppose ETS2. He emphasized that when the Group countries work together, they always succeed. According to Fico, a meeting of the V4 prime ministers should be convened on this matter. The problem is that there are huge differences within the V4 on other issues – such as the approach to Ukraine or the rule of law – which makes cooperation difficult. Still On November 5, during the above-mentioned EU Council with the participation of environment ministers, representatives of the Visegrad Group presented a common approach to the 2040 target, which they rejected.
— With each passing year, it will become more and more difficult to keep certain arrangements unchanged. In 2027, there will be parliamentary elections in Poland, presidential elections in France, and elections in other countries. Their results may change the situation in the Council of the European Union and increase pressure on the Commission, so there will definitely be some changes in ETS2, says Bolesta. Moreover, in his opinion, a potential revision may also cover the 2030 goals adopted in 2023, formulated in the Fit for 55 package. — The 2030 goals are very difficult for everyone, so there will certainly be constant pressure on the Commission, which may increase with elections in other countries – predicts the deputy minister of climate.
What it will be like after 2027 will depend, among other things, on the political system in the EU. Today, there is no majority in the EU to reject the 2040 target or torpedo ETS2. On the contrary, the EU is systematically raising the climate bar, although in a milder version than the original proposals. The above-mentioned council of environment ministers of the EU countries agreed to another climate goal – by 2040, emissions in the EU are to decrease by 90%. compared to 1990. Poland and its allies only managed to negotiate revision clauses. This allows the European Commission to review regularly, every two years, what progress has been made towards achieving the target. And in the event of an increase in energy prices, a decline in competitiveness, increased negative pressure on societies or macroeconomic problems, the EU will be able to revise the target for 2040. In practice, this opens the way to softening ambitions and adjusting the goal so that instead of 90 percent it was, for example, eighty-something percent.
We also managed to push through another demand shared by Poland regarding the so-called offsets, i.e. international reduction units. Their share in achieving the goal was increased from three to five percent. This solution will enable the achievement of the goal of reducing CO2 emissions through pro-climate projects implemented outside the EU. Bolesta argues that this will allow EU countries to reduce the costs of implementing the climate goal, because international reduction units are much cheaper than ETS allowances.
Warsaw also proposed excluding the defense industry from the 2040 target, which did not happen. However, as Krzysztof Bolesta says, this idea will come back when the ECJ directive is revised. The revision is to cover, among other things, “challenges and opportunities for the global competitiveness of EU industry.” It will also take into account “the evolution of energy prices and their impact on industry and households.”
The revision of the ECJ directive will be crucial
The European Commission announced a revision of the ETS directive in the third quarter, but – according to the deputy minister – it may show the results of the first works already in spring. — The revision of the ECJ directive will be a key moment for us – emphasizes Krzysztof Bolesta. He adds that “during the same ETS revision, the Commission promised that it would be slower to take away free permits for industries exposed to emissions leakage.”
The EU Council's position on the 2040 target will now be negotiated with the European Parliament. On this occasion, KO MEP Andrzej Halicki announces efforts to delay ETS2 until 2030. According to him, it may be possible to assemble a majority in the European Parliament on this matter. Halicki also admits that there is no chance of building support for rejecting ETS2 in its entirety.
What will the new climate target mean for Poland? At this stage, detailed requirements for individual EU countries have not yet been defined. Specific regulations also need to be agreed on which sectors and to what extent will be obliged to achieve the CO2 emission reduction target by 2040.
Despite skepticism about increasing the EU's climate ambitions, the Ministry of Climate and Environment assures that Poland wants climate neutrality, but “climate policy is to serve people and be built based on the Polish economy and European technologies.”
