The EU Emissions Trading Scheme (EU ETS) is a key tool in Europe's commitment to decarbonization and achieving carbon neutrality by 2050. Building upon global agreements, the EU has set ambitious targets, including a 55% reduction in greenhouse gas emissions by 2030, and continues to refine its approach with schemes like Fit for 55 and a proposed 90% emission reduction by 2040. Europe uses responsible investing in its path to net zero.
The European Union Emissions Trading Scheme (EU ETS) turns climate ambitions into an effective market mechanism for decarbonization. As a global pioneer in climate action, Europe drives the adoption of ambitious environmental targets worldwide and often sets even higher domestic goals. Additionally, the EU learns from real-world environmental conditions to continuously strengthen its climate ambitions.
Here is a timeline and description showing how Europe’s climate ambitions have grown through global climate agreements and even more far-reaching EU policies.
The UNFCCC, signed in 1992 by 165 countries, is the foundational agreement of international climate change policies. It has formalized the aim to stabilize greenhouse gas concentrations in the atmosphere, laying the groundwork for future international climate efforts.
Building on the UNFCCC, the Kyoto Protocol was signed in 1997 by 84 countries. This protocol is a step forward, as it operationalized the principles of the UNFCCC, setting more specific commitments for reducing greenhouse gas emissions. The convention expects countries to develop and implement mitigation policies, and to report periodically on their progress towards their individual climate targets.
A key moment in the global climate effort came with the Paris Agreement, signed in 2016 by 195 countries. This agreement set a long-term concrete temperature goal of keeping the rise in global temperatures well below 2°C above pre-industrial levels, with an aspirational target of limiting the increase to 1.5°C.
In 2020, the European Union launched the European Green Deal; the bloc will be carbon neutral by 2050. This ambitious plan aims to reduce all possible CO2 emissions and offset the remaining hard-to-abate emissions. The European Green Deal is among the EU's most significant climate initiatives, paving the way for decarbonization across every sector.
The Fit for 55 framework charts the course to meet the European Green Deal’s climate goals. Indeed, a climate objective with a 2050 time horizon may be seen as too distant to motivate effective climate action today. This is why the Fit for 55 brings about more tangible and shorter term objectives. The 2023 legislation sets a 2030 objective to reduce greenhouse gas emissions by 55% from 1990 levels. It also introduces significant amendments to the EU ETS, like the more rapid decrease in allowance supply and the establishment of the Carbon Border Adjustment Mechanism (CBAM).
The direction towards climate neutrality is set, but the specific steps to get there are still being refined. We still need to establish the specific milestones for moving from the 2030 Fit for 55 target to the 2050 climate neutrality objective. For now, the official European communication proposes a 2040 target of a 90% reduction in emissions. Once we have this clearly set in the legislative texts, as always, the EU ETS will follow. The revisions of the scheme to come will ensure that the mechanism keeps driving decarbonization in line with institutional promises.
Share it with your network and introduce Homaio to those interested in impact investing!
A newsletter to help you understand the key challenges of climate finance.
Dive into the world of carbon markets, where economics, finance, and environmental science converge. Get your ultimate guide now.
.avif)
Share it with your network and introduce Homaio to those interested in impact investing!
