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Non-ETS climate policy and effort sharing in the EU: Flexibiilty & the potential for a project-based mechanism

As part of the 2030 framework for climate and energy policies, the EU has committed to reduce GHG emissions in non-ETS sectors by 30%, compared to 2005. This is a significantly higher target than the 2020 goal of reducing GHG emissions in these sectors by 10%.

This much stronger reduction effort that will be required by the EU Member States will arguably result in more demand for the flexibility provisions which are part of the Effort Sharing Decision (ESD). The European Council has foreseen this in its Conclusions of October 2014 and called for the “existing flexibility mechanisms to be significantly enhanced”.

One of these flexibility mechanisms could be a domestic offset mechanism. The current ESD contains an article dedicated to project activities. The majority of the provisions, however, regard international credits which are not relevant for the ESD up to 2030, as the EU’s target is for domestic reductions only.

Art. 5(7), nevertheless, allows Member States to use credits issued pursuant to Art. 24a of the EU ETS Directive towards their commitment under the ESD, without quantitative limits. This would create a link between the ETS and non-ETS sectors, if not for the fact that this Art. 24a has never been activated.