The revision of the directive governing the operation of the European Emissions Trading System (EU ETS) has been one of the most eventful lawmaking processes in recent years, writes Nikos Mantzaris.
Nikos Mantzaris is energy and climate policy expert in WWF Greece.
The debates amongst various stakeholders and lawmakers about the level of ambition, the exemptions for various industries and the governance of the funding mechanisms have been intense, to say the least.
After the deliberation of the European Parliament on 15 February and the general approach agreed by Environment Ministers on 28 February, the revision process enters its most crucial stage as the trialogue negotiations between the European Parliament, the Council and Commission officially begin tomorrow (4 April).
Amongst the most important unresolved issues of the upcoming negotiations concerns the establishment of a Just Transition Fund (JTF) with 2% of ETS, comprised of 310 million allowances or, if the estimates of the Commission for the average carbon price in 2021-2030 prove to be true, €8 billion.
The rationale for the establishment of such a distinct fund is to provide financial assistance to the workers in coal/lignite mining regions in the poorer member states that will suffer the most from the transition to a low-carbon economy, as well as to support the transformation of the local economies towards sustainable economic activities.
The European Parliament voted in favour of the establishment of a JTF, whereas, despite its overall ambition, the general approach with which the European Council enters the trialogue negotiations contains no reference to it. In fact, it was only the Greek minister who openly emphasised the significance of such a Fund in the discussion on 28 February.
Some argue that such a Fund is not necessary and that the corresponding needs can be covered by the European Globalisation Adjustment Fund (EGF). A mere comparison between the true needs for a Just Transition and the size of the EGF is more than sufficient to show the lack of realism of this argument.
The EGF has a maximum annual budget of €150 million for the period 2014-2020 (obviously for the entire EU), whereas the proposed JTF will be approximately five times bigger and will still be far from being enough.
Recent analysis on behalf of WWF Greece revealed that for the shift of the unemployment-plagued economy in Western Macedonia (Greece’s premier lignite region) towards sustainability, investments of approximately €2.3 billion in the period up to 2030 will be required.
So even if crisis-stricken Greece receives a generous share of the yet unestablished Just Transition Fund, it will have to supplement it by other funding mechanisms.
It is obvious that if the EU truly wants the shift towards a low-carbon economy to be socially just, the least it could do is to establish such a special fund as part of the EU ETS revision process. Otherwise, the closure of mines and coal power plants will cause great social turmoil in many European regions currently strongly dependent on coal and lignite, as the workers will be left without a safety net.
The relative economics of clean energy versus coal have drastically shifted in favour of the former in recent years. Therefore, phasing out coal has long ceased to be an issue of “if” and is now one of “when”.
The ETS reform offers the EU leaders and lawmakers a great opportunity to prove that social justice is a top European value underlying all policies and not just a punch line. Will they seize it?