IOGP Europe position statement on the EU ETS revision

Executive summary

The European Commission’s proposal to revise the EU Emissions Trading System (ETS) seeks to align the framework with the EU’s 2040 climate target while strengthening industrial competitiveness, investment, and decarbonization. The more gradual emissions trajectory and additional flexibility are important steps towards maintaining a functioning carbon market as the cap tightens.

The revised framework should nevertheless provide greater investment certainty, flexibility, and regulatory clarity, while preserving effective carbon-leakage protection and enabling the scale-up of industrial decarbonization technologies.

The following issues should be addressed during the legislative negotiations:

1. Free allocation conditionality: Free allocation is a carbon-leakage protection instrument, not an investment subsidy. It should not depend on prescribed investments or emissions outcomes that may be affected by factors outside an operator’s control. The proposed new conditionality regime should therefore be deleted, with decarbonization supported by dedicated investment instruments instead.
2. Integration of permanent carbon removals: Enable direct trading and use of eligible Carbon Removals and Carbon Farming (CRCF)-certified permanent removals for ETS compliance, alongside the Commission purchasing programme, with appropriate safeguards and a clear 1:1 compliance value. The 250 Mt should define the scale of the Biomass Carbon Capture and Storage (BioCCS)/Direct Air Carbon Capture and Storage (DACCS) purchasing programme, rather than cap the wider integration of removals into the EU ETS, and sufficient financing should be available to deliver this volume.
3. International carbon credits: Ensure a predictable Linear Reduction Factor (LRF) trajectory that does not depend on future credit availability, and allow ETS operators to acquire and use eligible international credits directly alongside any EU-level purchasing facility.
4. Maritime and offshore activities: Provide legal certainty from 2027 through clear transition arrangements, workable scope and emissions-attribution rules, proportionate Monitoring, Reporting and Verification (MRV) requirements, and coordination with other relevant carbon-pricing regimes and the International Maritime Organization (IMO) Net-Zero Framework (NZF).
5. COâ‚‚ transport and storage risk: Reduce investment and regulatory risks across cross-border Carbon Capture and Storage (CCS) value chains through a targeted EU-level guarantee mechanism and a competent-authority framework ensuring that each infrastructure component is subject to one authority.

In addition, the revision should provide a coherent and predictable framework across a number of horizontal issues. Eligibility for the use of ETS revenues should remain technology-neutral and based on demonstrable decarbonization outcomes. Countries participating fully in the EU ETS should be treated on equivalent terms, while regulatory coherence with the UK ETS should facilitate cross-border investment and CCS value chains. Application of the Do No Significant Harm principle should build on existing regulatory requirements and avoid duplicative assessments.

ETS accounting rules for e-fuels should be aligned with Renewable Energy Directive (RED) III and the Renewable Fuels of Non-Biological Origin (RFNBO) framework to avoid unintended consequences for eligibility and Greenhouse gas (GHG) performance.

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