The European Union’s emissions trading system and the ‘fit for 55’ package

Abstract

The EU ETS is frequently seen as the foundation of the EU's climate policy. Its goal is to reduce emissions by charging for GHG emissions in the manufacturing, power, and aviation sectors – and through the latest proposals known as the FF55 package, to cover the BRT sectors. It accomplishes this by encouraging investments in emission reductions by raising the cost of routine energy-intensive businesses. Additionally, it offers a significant opportunity for the EU to redirect money from polluting projects to those that support climate action, industry modernisation, and innovation. The EU’s FF55 legislative package aims to evaluate, reform, and update EU law in accordance with the climate targets established by the Council and the European Parliament. The intention of the measures comprising the package is to ensure that EU policies are in accordance with the climate targets. It is based on the EU's target of at least a 55% reduction in net GHG emissions by 2030. The package contains proposals for a wide range of changes to the current EU ETS. The proposed increased ambition is intended to be secured by consolidating and strengthening the existing provisions, as well as by broadening the scheme's application to cover maritime transport, phasing out the free allocation of allowances to aviation and industries covered by the CBAM, and developing a new standalone ETS 2 for BRT, among other measures. This dissertation has reviewed the ETS, traced its historical development since its inception, and assessed the effects of the EU's FF55 package on the EU ETS and, ultimately, the effects of the amended ETS on the EU MS. It has looked at how the ETS might be expected to change and has tried to answer the question as to whether the improvements that the EU has set out to achieve in the domain of climate change will actually materialise.