Trilogues are ongoing for the EU ETS Revision. Tuesday 22 November marks the fourth in the series of talks that are hoped to conclude in mid-December. In previous trilogues, 

 on market access restrictions and Article 29a. Tuesday’s talks established a tentative agreement on ETS expansion to cover maritime emissions but revealed no new progress on other policy dimensions.

A text for the agreement has not yet been released, but several aspects appear to align with the Commission’s initial proposal. The scope will be maintained – ships above 5000 gross tons, all intra-EU voyages, and 50% coverage of extra-EU voyages arriving to/departing from EU ports (approximately 90m tonnes).

The table below provides an overview of the institutional positions on maritime inclusion entering trilogues and the tentative agreement reached on Tuesday. So far, the reported agreement just touches upon the most contentious policy calibration: the timeline for gradual surrendering obligation for shipping. The EP pushed for the fastest timeline, including 100% coverage by 2024. The Commission’s position reflected a gradual phase-in to full coverage by 2026. The Council mirrored the Commission’s plan, with a one-year delay to 2027.

The compromise agreement would maintain a gradual phase-in, but the first year of compliance for the maritime sector is delayed to 2024. Full surrendering obligation would begin in 2026. This would speed up the timeline to align with the EC’s original timeline for full inclusion but remains far from the EP’s goal of 100% coverage by 2024.

Maritime emission inclusion timeline

Earlier reporting this month indicated that the EP was willing to move away from a dedicated Ocean Fund from which the maritime sector would receive decarbonization support. This is reflected in this compromise, earmarking 20 million Innovation Fund allowances for maritime abatement.

The compromise also lays out a roadmap for future expansion of the scope of both vessels and emissions covered. Monitoring of non-CO2 emissions will be required from 2024 and included from 2026. Additionally, vessels between 400-5000 in gross tonnage as well as large offshore vessels will be included from 2026 and 2027 respectively, with MRV requirements in place by 2025.

In 2028, the Commission is tasked with undertaking a review to examine efforts from the IMO (reminder: a 2018 review of IMO efforts determined that the organization’s abatement efforts were insufficient to meet EU goals, prompting the inclusion of the maritime sector in the EU ETS).

A Council document leaked earlier this week detailed the main foci for Tuesday’s trilogues: maritime inclusion, ETS2 for buildings and road transport, and overall ETS ambition. A tentative agreement on maritime has been reached, though reporting indicates that pen has not yet been put to paper. On the other two topics, nothing has emerged. With maritime discussions set to continue next Tuesday (29 November), the goal of completing interinstitutional negotiations by mid-December is under pressure.

The document also outlined first steps towards reaching middle ground with the EP on both of these topics. The following sections provides an overview of each debate, institutional positions, and the compromise outlined in the Council document.

The ETS for buildings and road transportation (or ETS2) has been one of the most contentious points of discussion in the ETS revision. Almost scrapped during European Parliament debate over the summer, the ETS2 has faced critique over impact on private citizens. In light of this, the European Parliament proposed a split implementation: 2025 for enterprise and 2029 for private citizens. Additionally, their amendments to the Commission’s proposal would introduce a price cap of 50 EUR/Mt as well as an emergency price brake in case of excessive prices. The Commission’s and the Council’s positions envisage start dates of 2026 and 2027 respectively without any split scope.

The proposed Council compromise would move the start date to fall in line with the Commission proposal as well as maintaining an emergency price brake (albeit without a price ceiling). Their proposal was, however, fundamentally opposed to a split implementation like that coming from the European Parliament.

ETS2 Positions

Ambition in ETS discussions is split into three distinct elements: reduction target, rebasing of the overall cap, and the linear reduction factor (LRF). For each of these elements, the Council and Commission positions align: 61% abatement in ETS sectors, 117Mt cap rebasing in 2024, and an increased LRF from 2.2% to 4.2%. The EP supports an overall reduction target of 63%, 120Mt EUA rebasing split between 2024 and 2026, and a gradually increasing LRF from 4.4% in 2024 to 4.6% from 2029 onwards.

The Council’s compromise nudges their position, increasing overall ambition from 61% to 62%. It also concedes a two-time cap rebasing without specifying volumes. Finally, the document expresses the possibility of slightly adjusting the LRF, again without specifying exact numbers. Notably however, the limit to compromise on these calibrations is limited – “The Presidency considers it premature to move away from the General Approach of the Council.”

Ambition positions

The EP and the Council have reached a tentative agreement on the inclusion of maritime emissions in the EU ETS – but that agreement is not set in stone and will continue during next week’s trilogue (29 November)

The agreement will gradually phase in maritime emissions – 35% in 2024, 75% in 2025, and 100% in 2026

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In ongoing trilogue negotiations on the revision of the EU ETS, a tentative agreement has been reached on the Commission's proposal to include maritime emissions in the carbon market. The agreement is not yet set in stone and will continue to be hammered out during next week's talks. If implemented, the maritime sector would be required to begin surrenduring allowances to partially cover their emissions from 2024.

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Tentative agreement on maritime emissions under EU ETS

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