(1)

The Paris Agreement (4), adopted on 12 December 2015 under the United Nations Framework Convention on Climate Change (UNFCCC) (the ‘Paris Agreement’), entered into force on 4 November 2016. The Parties to the Paris Agreement have agreed to hold the increase in the global average temperature well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1,5 °C above pre-industrial levels. That commitment has been reinforced with the adoption under the UNFCCC of the Glasgow Climate Pact on 13 November 2021, in which the Conference of the Parties to the UNFCCC, serving as the meeting of the Parties to the Paris Agreement, recognises that the impacts of climate change will be much lower at a temperature increase of 1,5 °C, compared with 2 °C, and resolves to pursue efforts to limit the temperature increase to 1,5 °C.

(2)

The urgency of the need to keep the Paris Agreement goal of 1,5 °C alive has become more significant following the findings of the Intergovernmental Panel on Climate Change in its Sixth Assessment Report that global warming can only be limited to 1,5 °C if strong and sustained reductions in global greenhouse gas emissions within this decade are immediately undertaken.

(3)

Tackling climate- and environmental-related challenges and reaching the objectives of the Paris Agreement are at the core of the communication of the Commission of 11 December 2019 on ‘The European Green Deal’ (the ‘European Green Deal’).

(4)

The European Green Deal combines a comprehensive set of mutually reinforcing measures and initiatives aimed at achieving climate neutrality in the Union by 2050, and sets out a new growth strategy that aims to transform the Union into a fair and prosperous society, with a modern, resource-efficient and competitive economy where economic growth is decoupled from resource use. It also aims to protect, conserve and enhance the Union’s natural capital, and protect the health and well-being of citizens from environment-related risks and impacts. At the same time, that transition has gender equality aspects as well as a particular impact on some disadvantaged and vulnerable groups, such as older people, persons with disabilities, persons with a minority racial or ethnic background and low and lower-middle income individuals and households. It also imposes greater challenges on certain regions, in particular structurally disadvantaged and peripheral regions, as well as on islands. It must therefore be ensured that the transition is just and inclusive, leaving no one behind.

(5)

The necessity and the value of delivering on the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, the living and working conditions and the well-being of the Union’s citizens. Those effects have shown that our society and our economy need to improve their resilience in relation to external shocks and act early to prevent or mitigate the effects of external shocks in a manner that is just and results in no one being left behind, including those at risk of energy poverty. European citizens continue to express strong views that this applies in particular to climate change.

(6)

The Union committed to reducing the Union’s economy-wide net greenhouse gas emissions by at least 55 % compared to 1990 levels by 2030 in the updated nationally determined contribution submitted to the UNFCCC Secretariat on 17 December 2020.

(7)

Through the adoption of Regulation (EU) 2021/1119 of the European Parliament and of the Council (5), the Union has enshrined in legislation the objective of economy-wide climate neutrality by 2050 at the latest and the aim of achieving negative emissions thereafter. That Regulation also establishes a binding Union domestic reduction target for net greenhouse gas emissions (emissions after deduction of removals) of at least 55 % compared to 1990 levels by 2030, and provides that the Commission is to endeavour to align all future draft measures or legislative proposals, including budgetary proposals, with the objectives of that Regulation and, in any case of non-alignment, provide the reasons for such non-alignment as part of the impact assessment accompanying those proposals.

(8)

All sectors of the economy need to contribute to achieving the emission reductions established by Regulation (EU) 2021/1119. Therefore, the ambition of the EU Emissions Trading System (‘EU ETS’), established by Directive 2003/87/EC of the European Parliament and of the Council (6), should be adjusted so as to be in line with the economy-wide net greenhouse gas emission reduction target for 2030, the objective of achieving climate neutrality by 2050 at the latest and the aim of achieving negative emissions thereafter, as laid down in Regulation (EU) 2021/1119.

(9)

In order to address the structural imbalance between supply of and demand for allowances in the market, Decision (EU) 2015/1814 of the European Parliament and of the Council (7) established a market stability reserve (the ‘reserve’) in 2018, which has been operational since 2019. Without prejudice to further revisions of the reserve as part of the general revision of Directive 2003/87/EC and of Decision (EU) 2015/1814 in 2023, the Commission should continuously monitor the functioning of the reserve and ensure that the reserve is kept fit for purpose in case of future unforeseeable external shocks. A robust and forward-looking reserve is essential to ensure the integrity of the EU ETS and to effectively steer the EU ETS so that it can contribute, as a policy tool, to achieving the Union’s climate-neutrality objective by 2050 at the latest and to the aim of achieving negative emissions thereafter, as laid down in Regulation (EU) 2021/1119.

(10)

The reserve functions by triggering adjustments to the annual volumes of allowances to be auctioned. In order to preserve a maximum degree of predictability, Decision (EU) 2015/1814 established clear rules for placing allowances in the reserve and releasing them from it.

(11)

Decision (EU) 2015/1814 provides that, where the total number of allowances in circulation is above the established upper threshold, a number of allowances corresponding to a given percentage of that total number of allowances is to be deducted from the volumes of allowances to be auctioned and placed in the reserve. Conversely, if the total number of allowances in circulation falls below the established lower threshold, a number of allowances is to be released from the reserve to Member States, and added to the volumes of the allowances to be auctioned.

(12)

Directive (EU) 2018/410 of the European Parliament and of the Council (8) amended Decision (EU) 2015/1814 by doubling the percentage rate to be used for determining the number of allowances to be placed each year in the reserve from 12 % to 24 % until 31 December 2023 for the purpose of delivering a credible investment signal to reduce CO2 emissions in a cost-efficient manner. That amendment was adopted in the context of the former Union 2030 climate target of reducing economy-wide greenhouse gas emissions by at least 40 % compared to 1990 levels.

(13)

In accordance with Decision (EU) 2015/1814, within three years of the start of the operation of the reserve, the Commission was to carry out its first review of the reserve on the basis of an analysis of the orderly functioning of the European carbon market and, where appropriate, submit a proposal to the European Parliament and to the Council.

(14)

In the review of the reserve, carried out in accordance with Decision (EU) 2015/1814, the Commission paid particular attention to the percentage rate for the determination of the number of allowances to be placed in the reserve, as well as to the numerical value of the threshold for the total number of allowances in circulation and the number of allowances to be released from the reserve.

(15)

The analysis carried out in the context of the Commission’s review of the reserve and the expected developments relevant to the carbon market demonstrate that a rate of 12 % of the total number of allowances in circulation for the determination of the number of allowances to be placed in the reserve each year after 2023 is insufficient to prevent a significant increase of the surplus of allowances in the EU ETS. Maintaining the rate of 24 % in this Decision should be without prejudice to further revisions of the reserve, including, if appropriate, a further revision of the percentage rate for the determination of the number of allowances to be placed in the reserve, as part of the general revision of Directive 2003/87/EC and Decision (EU) 2015/1814 in 2023.

(16)

Since the objective of this Decision, namely the continuation of the current parameters of the reserve as established pursuant to Directive (EU) 2018/410, cannot be sufficiently achieved by the Member States but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Decision does not go beyond what is necessary in order to achieve that objective.

(17)

Decision (EU) 2015/1814 should therefore be amended accordingly,

‘By way of derogation from the first and second sentences of this subparagraph, until 31 December 2030, the percentages and the 100 million allowances referred to in those sentences shall be doubled.’.