Jüri Ratas: EU Emissions Trading System Needs Fine-Tuning

The European Union's Emissions Trading System (ETS), launched over 20 years ago, has significantly reduced industrial and energy sector emissions—by more than half. However, according to Jüri Ratas, the system has also hurt the competitiveness of European companies in global markets, as rising carbon prices increase production costs, especially for energy-intensive industries. This leads to 'carbon leakage,' where production moves to regions with lower carbon costs without reducing global pollution.

Ratas, a member of the European People's Party (EPP) group in the European Parliament, notes that the European Commission will present a review of the ETS on July 15, and changes are needed. The EPP group proposes several adjustments: slowing the pace of quota reductions after 2030, retaining free allowances for sectors not adequately covered by the Carbon Border Adjustment Mechanism, including carbon capture and storage technologies, allowing limited use of emission credits outside the EU, protecting European exports, reforming the Market Stability Reserve to reduce price volatility, and directing ETS revenues to economic modernization.

Additionally, the Estonian delegation, led by Ratas and Riho Terras, put forward four specific proposals: maintaining a permanent exemption for ice-class ships in maritime ETS, greater flexibility for member states in using ETS revenues (e.g., for Rail Baltic), improving the geographical balance of the Innovation Fund to benefit smaller countries, and reserving part of a potential new investment fund for less wealthy member states.

Ratas emphasizes that the next phase of European climate policy should not be a choice between climate and competitiveness; a balanced approach is needed to keep Europe's economy strong while progressing toward climate neutrality.