The EU Emissions Trading System EU-ETS) is the cornerstone of the European Union's policy to combat climate change. The EU ETS works on the 'cap and trade' principle. Within the cap, installations receive or buy emission allowances which they can trade with one another as needed. After each year a company must surrender enough allowances to cover its emissions.
The phase IV of the EU-ETS started in 2021. The EU ETS Directive was revised to cater for the EU’s increased 2030 target, with a trilogue agreement concluded in December 2022, that establishes in parallel the CBAM (Carbon Border Adjustment Mechanism) regulation.
Following this reform, the EU ETS reduction target for 2030 has been increased from 43% to 63%. A significant number of new rules – for instance on benchmark for free allocation, allocation rules, innovation funding – are also applicable. Furthermore, significant changes will come in the second part of the phase IV (2026 – 2030). For the cement industry, the CBAM will gradually replace free allocation as of 2026, in a move to level the playing field between EU and non-EU suppliers.
CEMBUREAU welcomes the revised ETS and the incentives it provides for the decarbonisation of energy-intensive sectors, for instance through an ambitious innovation fund. However, it is clear that the ETS’ increased ambition will be challenging and put considerable pressure on ETS sectors. From this perspective, the implementation of a fully watertight CBAM is essential to create a fair level playing field on CO2 costs for EU27 and external producers of cement.