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The EU ETS and carbon credits: Did COP28 shut the door even more tightly?

In a not-so-distant future, Europe must decide how to deal with residual carbon emissions covered by the EU ETS. Under all plausible cap trajectories, the issuance of emission allowance units (EUAs) will reach zero by 2040. Manufacturing industries unable to end all emissions will need options for compliance. One possibility – which already enjoys very little political support – is to again open up for international carbon credits. The recent failure at COP28 to agree on a globally acknowledged system for carbon credit trading makes the prospect of the EU allowing offsets even less likely than before the global climate summit…but in the longer term, the use of international crediting will force itself onto the EU’s list of options.  

Figure 1. EU ETS balance to 2040.Emissions cap will tighten fast In February 2024, the European Commission is set to release a ‘communication’ on Europe’s 2040 climate target. This new goal will connect the 2030 target of at least 55% reduction from 1990 ...

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