Posted on July, 12 2021

• Lowering the maximum amount of emissions allowances, to bring it closer to real emissions levels and avoid the creation of a surplus in the 2020s. We support the removal of 350 million emissions allowances from 2023.
• Increasing the ETS target for 2030 to 70% emissions reductions in those sectors. The  annual reduction in allowances should be 3.6% from 2023.
• Reviewing the mechanism set up to withhold extra allowances from the market - the ‘Market Stability Reserve’ . This is crucial to absorb the historical surplus of allowances (and a potential new surplus due to the COVID crisis). We need to take more allowances off the market (at a 24% rate after 2023, not 12% as planned), lower thresholds, and continuously cancelling allowances which are taken off the market. 
• Free allocation should be entirely phased out as of 2023 as it directly contradicts the ‘polluter pays' principle and has been shown to slow down industrial decarbonisation.
• Auctioning revenues should be invested in the Modernisation and Innovation Funds, to support industry decarbonisation. 
• Member States should make better use of ETS revenues and spend them on climate action entirely. The ETS directive should include a clear definition of what counts as ‘climate action’, in line with ‘do no significant harm’ criteria and social safeguards.
• Member States have to drastically improve the quality and transparency of their ETS reporting, which has been clearly lacking. 

• The CBAM must be designed and implemented as an alternative to the free allocation of allowances under the ETS. In addition to being double subsidies to industry, it is also unclear and doubtful that both provisions (CBAM and free allocation) would be compatible with WTO rules. 
• It must ensure fairness and equity, for example by ensuring any revenues are redistributed in a fair way, and avoiding any negative impact on the economies of developing countries. 
• It must be part of a wider set of policies to enable and promote investment in low carbon industrial processes, energy efficiency measures and renewable energies to achieve the decarbonisation of industry. 

• The Effort Sharing Regulation and the national binding emissions reduction targets it sets on non-ETS sectors must be maintained and brought in line with the 1.5C target in the Paris Agreement.
• The existing offsetting arrangements between the ESR and the land use and forestry sectors (referred to by the Commission as ‘flexibility’) should be scrapped. 

• An increased renewable energy target of at least 50% by 2030
• An end to incentives for burning trees and dedicated biofuel or energy crops for energy
• The subsidies that Member States currently spend on harmful bioenergy to be redirected to the clean technologies that are part of the climate solution, including wind and solar.
• An end to new hydropower plants in the EU, on the grounds that it would make a trivial contribution to cutting GHG emissions but have a huge impact on freshwater biodiversity - see this joint NGO manifesto for further details.

• The EU should aim to increase net removals to 600 Mt CO 2 -eq per year, to be met through the rapid expansion of nature restoration and sustainable agricultural and forestry practices that are a win-win for the climate and biodiversity. 
• The accounting rules for the various different land use categories covered by the LULUCF Regulation must be changed. Right now, these ‘bake-in’ historical levels of emissions and/or harvesting and do not accurately reflect the emissions and removals that are ‘seen’ by the atmosphere. 
• There should also be clear separation between emissions and removals in the land use sector and emissions in other sectors: net removals in the land use sector are hard to measure and not necessarily stable, so should not be treated as tonne-for-tonne equivalent to fossil fuel emissions, or used to offset and hence delay climate action elsewhere.