Climate neutrality : policy scenarios for emissions trading

Abstract

The European Commission has confirmed plans to enshrine a 90% greenhouse gas (GHG) reduction target by 2040 into law, in line with the European Climate Law’s goal of achieving climate neutrality by 2050. Achieving the 2030 interim target is crucial, with the implementation of Fit-for-55 proposals playing a key role. In this context, assessing sectoral progress and strengthening policies to enhance ambition are critical. This policy brief highlights insights from the 2024 Net Zero Carbon Market Policy Dialogue (NZCMPD), organized under the LIFE COASE project, which explored the future of the EU Emissions Trading System (ETS). The discussions addressed expanding carbon pricing to new sectors—such as the ETS2 and agriculture—, integrating domestic industrial carbon removals into the ETS, and overcoming methodological challenges in ex-ante modelling. These insights, informed by input from the academic literature, contribute to the broader debate on shaping the future of carbon markets in the EU.