Remarks by Executive Vice-President Ribera and Commissioners Hoekstra and Jørgensen at the press conference on the EU Emission Trading System review and the Electrification Action Plan

Executive Vice-President Ribera

 

Thank you very much, and thank you for joining us today.

We are presenting a set of important proposals.

Recent weeks, and last Wednesday in particular, have provided a stark reminder of the consequences of climate change. Climate change means destruction: for our economy, our society and our infrastructure.

Europe is committed to achieving climate neutrality by 2050. We are a continent that has been driving climate action for at least 20 years. It is on the basis of that experience that we are presenting updated proposals today: proposals that draw lessons from the past, look towards the future and enable us to act more effectively.

The economics of climate action also shape our competitiveness, resilience and capacity for innovation.

For 20 years, we have worked to mainstream climate action across all our policies. Today, I am here with Commissioners Hoekstra and Jørgensen to present the review of the Emissions Trading System, the Electrification Action Plan and the proposal on future-proof electricity bills.

Together, these initiatives will help us consolidate everything we have achieved in recent years while ensuring that what remains to be done stays within our reach.

They follow a single logic: making the right choices and investing in Europe's future prosperity. They will help us build a cleaner, more resilient and more competitive economy, rooted in our shared values and common goals, and based on prices that tell the truth.

Green is cheaper and wiser. Dependency is expensive.

We know that decarbonisation is the best economic and security strategy for Europe. It strengthens our competitiveness, reduces our dependence on imported fossil fuels and makes our economy more resilient.

These are the principles at the heart of this mandate and of the Clean Industrial Deal.

Emissions trading makes polluters pay while generating the revenues needed to invest in our future. Together, these initiatives point Europe's economy in one clear direction: towards a future that is cheaper, greener, fairer, more competitive and more secure.

That is what today is about.

The Emissions Trading System is our flagship climate instrument. It has been 20 years since Europe first introduced an emissions trading system. It works well and provides an efficient framework for directing investment towards more sustainable solutions.

After 20 years, it is right to draw lessons from our experience and ensure that the system remains a driving force for the next 20 years.

These two decades have demonstrated how effectively emissions can be reduced in the sectors covered by the ETS, particularly in the power sector.

The ETS has generated €270 billion for investments in Europe's decarbonisation and has produced a positive ripple effect across the world.

But we have also learned important lessons. These lessons allow us to build on what works, improve what still needs to be improved and provide a predictable framework for the next 20 years. We want to reward those who move first and place their trust in this transformation, while giving others the confidence to catch up.

This proposal secures a robust carbon-price signal that will continue to guide investment away from fossil fuels and support the arrival of new clean products in our markets.

It maintains the price on carbon and reinforces confidence in investing in Europe. It also improves the way we reinvest the revenues generated by the system, helping European industry innovate, modernise and lead the transition.

The ETS remains a central driver of our economy-wide transition towards net zero, in line with the 90% emissions-reduction target for 2040 established in the European Climate Law.

It also operates within the broader international framework of the Paris Agreement. From 2036, as established in the Climate Law, we may count on a limited number of high-integrity, cost-effective international credits, should they be needed.

The use of these credits will be subject to a Commission report by 2033. Their use could also help reinforce the architecture of the Paris Agreement and send a message of cooperation to our international partners.

Today, we are also taking an important step towards our vision of a Europe powered by home-grown clean energy and free from dangerous fossil-fuel dependencies.

We are presenting an Electrification Action Plan to remove barriers and unlock electrification. We have already achieved a great deal, but progress remains too limited and too slow. We have done a lot, but much more remains to be done.

Europe's electrification rate has remained stuck at around 23% for a decade. We believe we can do better.

The Electrification Action Plan delivers on three fronts. It provides ambition and predictability. It makes the clean choice the default choice. And, through the accompanying legal proposal on future-proof electricity bills adopted today, it establishes important principles in law.

Electricity should be taxed less than gas. Network charges should be more efficient and help create a better-optimised energy system. We must also accelerate the rollout of smart meters, reaching at least 50% coverage by 2030 and 75% by 2033.

We are also committing to adopt a framework to phase out the €100 billion currently dedicated to subsidising fossil fuels.

We are convinced that this is the right way forward. But we also recognise that people and businesses need the right schemes and tools to make the transition easier.

This includes social leasing schemes, the use of artificial intelligence, the Industrial Decarbonisation Bank and investment boosters designed to support these objectives. It also includes innovative instruments such as the clean-heat market mechanism.

We can do better. We are convinced that Europeans not only have the opportunity to act, but also the capacity and strength to succeed.

Every year of delay means another year of higher costs and greater vulnerability. It means another year of exposure to crises we did not choose and another year of missed opportunities for Europe and its citizens.

We are ready to continue delivering.

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Commissioners Hoekstra

 

Ladies and Gentlemen,

A very good afternoon to all.

Today's proposal on the ETS review brings together three key goals: sustained truly ambitious climate action, much more competitiveness, and a huge boost for our independence.

It advances climate action, but at the same time it transforms the ETS into a genuine engine for innovation and investment. As well as re-industrialising Europe for the clean economy of the future.

It also helps to significantly level the playing field for companies and industries across the EU, strengthen the business case for “Made in the EU” and follows our simplification logic cutting unnecessary red tape. If we deliver on this plan, it will mean hundreds of billions in additional investments on European soil.

But before I dive in, let's first consider what the ETS is and what it has done:

No other single policy instrument in Europe has helped to reduce emissions on the same scale as the ETS. It's a phenomenal asset in our climate toolbox.

Since 2005, the ETS has helped cut emissions by 50% in the sectors it covers.

And why is this important?

• It helps us tackle the climate problem we are facing.
• It reduces the dramatic dependencies on imported fossil fuels and makes us more independent. Without ETS, Europe would now consume 100 bcm more gas, making us even more vulnerable than we are today.
• And it's much needed revenue generator which we invest in innovation and industrial decarbonisation. Roughly EUR 270 billion revenues since 2013.

So truly a great design.

But let's also acknowledge that it comes with three weaknesses we have insufficiently anticipated.

First, the world has changed considerably, with key European industries facing an unlevel playing field.

Heavy state subsidies, dumping, and dubious labour conditions abroad have wreaked havoc in key sectors of our economy.

We have rectified the balance to some extent with changes to CBAM but there is more we can do within the domain of the ETS and beyond.

Second, a great deal of companies have made investments in a clean future. We also have to acknowledge that others have not done enough to decarbonise in Europe and rather invested rather outside Europe.

This, in our view, cannot stand.

And third, if you look at the picture of what happens with the money. Member States receive about 80% of all ETS revenues. But of that 80%, less than 10% has been spent on industrial decarbonisation.

Industry rightly demands that more should flow back to decarbonise these sectors.

In terms of the main elements:

First, on the direction and ambition.

Today's proposal sets a trajectory that's fully in line with the EU's 2040 climate goals. The 90% we have set before.

It is ambitious, yet rewards investments that have been made.

 

Second, we are adopting a more business-friendly and savvy approach, which recognises those who have invested in the clean transition.

If you're an economic first-mover, if you're a frontrunner in the transition, you will continue to be rewarded.

Our objective is to boost the industries at the heart of Europe's economy.

We will do so by extending free allocations after 2030, in return for companies investing in decarbonisation in Europe.

One of the key differences with before is that free allocation does not mean free cash.

100% of the free allowances will need to be invested in Europe in decarbonisation.

This addresses the problem of companies pocketing free allowances and then selling them on the market and using them elsewhere.

Member States will also be required to spend 50% of their national ETS revenues on investments to decarbonise ETS sectors.

And alongside all this, we will dramatically ramp up investments in innovation and decarbonisation.

The EU ETS's Innovation Fund will continue to support first commercial applications of innovative technologies in a wide range of sectors.

On top of that, there will be a new Industrial Decarbonisation Bank, with EUR 100 billion in funding going towards industrial decarbonisation all across Europe at scale.

Part of that is a 30-billion-euro ETS Investment Booster that will be available before 2030.

With all this combined, we are turning the ETS into a true innovation and investment engine. To make Europe's industry fit for a clean future.

 

Third, the ETS will cover more sectors, helping to drive the clean transition across the economy, all in all hundreds of billions in the next decade:

On maritime:

• We'll be channelling a lot more money back to the sector – about 15 billion a year, which is roughly eight times the current level.
• We will also give the maritime industry a solid push to get its decarbonisation efforts off the ground with support for sustainable maritime fuel. In turn, this will help to establish a pan-European market for refining these fuels.
• We are also bringing smaller ships into the scope, with some deliberate exemptions, for example for ferries.
• And finally, we've introduced measures which show how strongly we stand for a level playing field. We're adding more  ports in the Southern Mediterranean and the UK to tackle ETS evasion: we won't ask anyone else to do anything we aren't already doing ourselves. But we do want to make sure that carbon is not being leaked.

On aviation,

• This is the only major sector where emissions are going up rather than down. At the same time, the EU faces a level playing field issue: currently ETS only covers the EEA and quite a few countries subsidise their airlines in ways we do not.
• This is why, as of 2029, carbon pricing will apply to any flight that lands within 5000km of the geographic centre of Europe. This means, for example, that a flight from Brussels to a Greek island will be treated the same as a flight arriving in the neighbourhood but outside the EU.
• We're also planning to channel much more money back to the sector (15 billion between 2029 and 2040 as opposed to 1.5 billion currently over an eight-year period). Just as we have done for the maritime sector, we'll give the aviation sector a huge boost – as they have rightfully asked for – for sustainable aviation fuel.
• All private jets departing and landing will also be covered. Why a family flying from Brussels to, for example, Benidorm pay ETS for the tickets of two adults and two kids while a private jet user can go back and forth and not pay one single time. That should be changed and stopped.

Municipal waste incineration is another area now covered by the ETS.

The idea is to encourage waste prevention and recycling, making them more cost-effective than incineration and giving a real boost to the circular economy.

Of course, not everything can be recycled. When that's the case, incineration is acceptable provided the carbon is captured.

We will also add 250 million tonnes of permanent domestic carbon removals into the ETS. This will give EU industry a bit more breathing space and help kickstart the market for removals.

 

Ladies and Gentlemen,

In today's ETS review proposal, we're truly taking an important step forward.

We're bringing together ambitious climate action with competitiveness, opening the door to Europe's re-industrialisation, and making a real push for energy independence.

We are modernising and strengthening the ETS – and we will do it differently for the industry.

And while the ETS is important, we need more to fix the EU's industry more at large.

We need more simplification, the completion of our internal market, a capital markets union, and an end to unlevel playing field too many of our companies.

We're convinced that, along with all these measures, today's review is the best way forward for our climate, competitiveness and independence.

This is how we will build the competitive, clean economy of the future.

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Commissioner Jørgensen

Since the closure of the strait of Hormuz, we've paid in Europe more than €50 billion more for our energy.

That's more than €50 billion extra, without receiving any extra energy, not one single molecule extra.

This shows us just how vulnerable we are.

It shows is just how economically unsustainable it is to be dependent on outside energy.

We need our own homegrown energy.

We need that also to be leaders in the fight against climate change: we're experiencing one of the hottest summers, if not the hottest summer, ever. People are actually dying from the heatwaves

And we need it for competitiveness reasons

We need to replace the black, expensive, polluting molecules, with cheap, clean, homegrown electrons.

And for that it's not enough to produce more renewables and more nuclear; that is certainly necessary, but it's not enough.

We also need these electrons to actually be used in our economies.

To heat our homes, our buildings.

To drive our cars.

To produce in our industry.

So this is why, we are today proposing to double the electrification rate in Europe.

This is not a small thing – it took us from the stone age until now to get to 23% and now we want to double it in 14 years.

But it's necessary and we also think it is both plausible and realistic.

How to do it:

First of all we need to drive electricity prices down

As things stand, electricity and fossil fuels are not on a level-playing field. Fossils are heavily subsidised and wouldn't survive in a truly competitive market.

We need to stop funding our dependencies with taxpayers' money.

First, we double down on the deployment of home-grown clean energy.

Because that is the cheapest and most reliable source of energy we have.

Second, we foster a better use of the infrastructure that already exists.

Network charges – which make up a significant part of the energy bills, must reward flexibility.

They must encourage a more efficient use of our grid. And they must enable consumers to use energy when it's cheaper.

This will avoid unnecessary and costly grid expansions and unlock cheaper network costs for energy intensive industries.

In other words, to allow for a faster penetration of cheaper clean energy, we need to make our electricity consumption smarter and more flexible.

This is why we want at least 50% of final customers to be equipped with smart meters by 2030.

And we have set out to achieve 200 GW of storage capacity by 2030.

We also want that electricity is taxed less than gas. This is a low-hanging fruit to reduce electricity bills.

At the same time, later this year we will propose measures to progressively phase out fossil fuel subsidies.

Public money should be spent on what benefits us. Not what harms us!

 

The second big goal of our Plan is to roll out more electric technologies.

In our homes, in the places where we live and work, and in the way we travel.

These technologies are efficient. They are effective.

And many of them are being made in Europe right now.

We don't have to wait. We have to make these technologies more affordable and more accessible.

 

In our factories: electrification is already technically feasible for 60% of industrial energy demand.

Electric furnaces and e-boilers offer new opportunities for efficiency and savings.

We will help industries to make the switch: with sector-specific roadmaps for electrification, as well as improved access to diversified low-carbon energy.

The revised Emissions Trading System will be key here.

It will support the decarbonisation of industry by channelling investments into emission reductions including electrification.

And with the €100 billion Industrial Decarbonisation Bank, including the €30 billion ETS Investment Booster, we will further spur investments into industrial electrification, grid connection infrastructure, as well as storage.

 

In our homes, offices, and public buildings: we aim to significantly increase the rate of heat pump installations by 2030.

The switch from gas boilers to heat pumps can cut the average EU household's heating bill by up to 60% – while of course, also helping to cool homes during the summer.

To make it happen, we will help derisk and finance investment and help consumers with transparent and comparable information and quotes.

And we will continue to support the roll out of electric cars and other vehicles.

We have set out how Member States can make these and other technologies more accessible through social leasing schemes, for example.

These schemes are already a success in a number of Member States.

It is time to spread this success across Europe!

 

By doing these things, we can save millions on fossil fuel imports.

And we can invest in cleaner and more efficient technologies, while creating millions of jobs.

Clean electrification value chains already employ over four million people across the EU.

By driving demand for EVs, heat pumps, and other technologies, we can multiply these jobs substantially.

 

So to conclude, the message to Europe today is very clear:

Choose electricity over fossil fuels. Choose green electrons over black molecules.

Choose lower bills. Cleaner air. Homegrown supplies.

Choose transformation over stagnation. Stability over volatility.

Security over vulnerability.

To put it simply, choose the future over the past:

Because the age of fossil fuels is coming to an end.

And for Europe, the future is clean energy and electrification.

Thank you.