The European Union’s new climate commissioner, Wopke Hoekstra, made written commitments on Wednesday (4 October) to defend a 90% cut in net greenhouse gas emissions by 2040, a move that financial analysts say will send EU carbon prices above the EUR400 mark.
Hoekstra secured backing from the Parliament’s environment committee on Wednesday and was formally confirmed in his new role by the full assembly during a plenary vote in Strasbourg on Thursday.
During a Parliament hearing earlier this week, the former Dutch foreign minister came under pressure from Green and left-wing lawmakers to show his commitment to ambitious EU climate policies by taking a stance on the EU’s climate target for 2040, due to be presented early next year.
His answer was unambiguous. “We will defend a minimum target of at least 90% net reduction by 2040,” Hoekstra said in a written statement sent to MEPs.
The 2040 target will determine the supply of CO2 allowances on the EU’s emissions trading scheme, which puts a limit on the carbon emissions of large industrial emitters.
According to researchers at the London Stock Exchange Group (LSGE), a 90% target for 2040 would send EU carbon prices rising “above EUR400 by 2040”.
Carbon prices on the EU ETS currently stand at EUR81 per tonne, after peaking at EUR100/t in February this year. With the current 2030 decarbonisation target of -55%, the EU’s carbon price is expected to rise to EUR160/t by the end of the decade, according to LSGE’s most recent analysis.
“The EU’s 90% decarbonisation target – if met – will see near full-decarbonisation across the power, manufacturing, transportation, and construction industries – creating an emissions trading system that will likely look very different to the ETS we have now,” Paula VanLaningham, director of LSEG Carbon Research, said in a statement.
“It’s important to stress that the EUR400/t price is not the cost of decarbonisation, but rather the potential cost facing the businesses that fail to decarbonise under the 90% scenario,” VanLaningham added.
Proposal due in early 2024
The European Commission is due to table its 2040 climate target plan in the first quarter of next year, a proposal that will be submitted for approval to EU member states and the European Parliament, who will have the final say.
Hoekstra said the Commission’s 2040 proposal will be informed by the European Scientific Advisory Board on Climate Change, which argued for a 90-95% target range in an opinion submitted in July.
“Naturally, we will do a thorough impact assessment and analyse different scenarios, reduction pathways, costs and benefits,” Hoekstra told MEPs during his parliamentary hearing on Monday, saying the Commission’s 2040 plan will be a collegial decision taken by the 27 EU commissioners.
“But I can offer you my clear commitment: I will act in line with the Board’s advice. I will use all instruments available to aim to enable the EU to reach the minimum recommended target of 90% net reductions. And I will work to bring our industry along,” he told MEPs.
The 90% target was also backed by Maros Sefcovic, a Slovak EU commissioner who was until now in charge of interinstitutional relations at the Commission and is now appointed to oversee the overall coordination of Europe’s green policies.
“Work on the Impact Assessment for a 2040 Climate target is already well underway,” Sefcovic said in written answers to MEPs, adding that “the 2040 target and corresponding carbon budget will set a clear trajectory for the decade between 2030 and 2040, thereby providing clarity and predictability to economic actors as well as citizens”.
Asked whether the responses from the two commissioners-designate were binding on Brussels, an EU spokesperson said decisions in the EU executive were always taken “collegially” among the 27 members of the Commission and that he could not prejudge the outcome.
“It’s not one or two members who set that target,” said Tim McPhie, the Commission’s spokesperson on climate. “But I think what you see here is a very clear steer from the two commissioners on this issue,” he said at a regular press briefing on Wednesday.
The EU carbon market was overhauled this year in a bid to reach the EU’s 2030 decarbonisation goals.
[Edited by Zoran Radosavljevic]
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