“It says, basically, if you want to pollute, you pay. If you don’t want to pay, innovate. And this is what happened,” Commission President Ursula von der Leyen said in response to the ETS criticism after Thursday’s summit in Alden-Biesen.
The ETS requires companies to hold a permit for each ton of CO2 they emit. They can buy and trade them on the market, while the number of permits gradually falls over time, slashing total possible emissions. This mechanism, besides shifting the costs of dealing with climate damage from society to those who cause it, encourages investments in clean manufacturing.
Recent reforms have pushed up the permit price from around €10 in the 2010s to around €80 now.
The system is beloved even by conservative critics of green regulation, as unlike other climate policies, the ETS is a market-based instrument and fully technology-neutral — it doesn’t tell companies how to reduce emissions.
The rising price, however, is producing a backlash.
Higher prices strengthen the incentive for companies to slash emissions, and thus turn expensive clean technologies, such as carbon capture, into sound investments. But they also add to companies’ operating costs — albeit marginally, as Europe’s high energy prices, driven by imported fossil fuel costs, present a far greater problem.