EU A stronger CO2 price signal will support Vattenfall in implementing its fossil fuel free strategy.

It took another long night of intensive talks between the EU-institutions, but finally, a political agreement on the new European emissions trading directive, EU ETS, was successfully concluded,  early Thursday morning.

The agreement on the EU ETS directive for Phase 4 (2021-2030) means that there is now a process to gradually reduce the number of emissions allowances supplied to the market by 2.2 percent per year from 2021. Another important part of the new agreement is that a significant amount of surplus ETS allowances will be taken out from the market, which will trigger further CO2 emission reductions in the covered sectors. 

“This is good news. Vattenfall has stressed the importance of strengthening the EU ETS for a long time. The increased ambition will support the EU in delivering on its commitment under the Paris Agreement. For Vattenfall, a higher price on the ETS allowances is essential for carrying out our strategy to become fossil fuel free within a generation,” says Erik Filipsson, Strategic Policy Advisor at Vattenfall.

The decision on the EU ETS reform comes timely as a message to the ongoing COP23 summit in Bonn on that the EU is determined to deliver on its climate target for 2030.  However, to fully align with the objectives of the Paris Agreement, including the aim to limit global warming to 1.5 °C, the EU will have to introduce a steeper annual reduction of the ETS allowance cap than 2.2 percent per year.

The directive needs to be formally confirmed by the EU-Council and the EU-Parliament before it comes into power.

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