Introduction
Europe, with the ETS European Union Emission Trading, is engaged to reduce, by 2020, 20% of its global emissions compared to 1990. It was the first to start its carbon market to reach these objectives.
What is a carbon market?
The carbon market was put in place in 2005 by the Kyoto’s protocol, to favor countries to reduce their CO2 emissions. But also to invest in technologies more clean in order to fight against global warming.
The carbon market is a trade system that allows trading CO2 emissions rights. The EU has put in place a carbon market to measure, control and reduce its industry emissions but also of its electricity producers. Market carbon is a cornerstone of European energy and climate policy.
Limit and reduce CO2 emissions
The trade systems that own installations, can buy or sell assets on the carbon market. Every actor having interest in reducing its emissions of which the cost is below the quota price on the market. Thus, the fields of reduction of carbon emissions at low cost are the first to be exploited.
What are the changes to the carbon market?
In December 2022, negotiating teams of Parliament and Conseil found an agreement to reform the carbon market. The objective is to reduce the CO2 emissions of the SEQE sectors (EU emissions trading system) by 60% by 2030. It should have 2 diminutions of the global number of quotas: from -90 million in 2024 and of -27 million in 2026.
The quotas trade system:
The quotas trade system of emissions is going to evolve. Indeed, it will be expanded to new markets, like the maritime sector, to intra-European flights and waste incineration sites. Accelerating the pace of reduction of the number of carbon quotas in the European market, to reach a decrease by 2030. Which will mean a higher price of carbon for industrials.
Towards a second carbon market:
The EU could create a second market of carbon. It will be created specifically for sectors of heating of buildings and road transport. By 2023, free quotas, accorded to electricity productors and energy consuming industries will be progressively deleted. They will disappear by 2034, in order to favor these industries to emit less CO2. The market effects of carbon for households will be amortized by the establishment of a ceiling of 45 euros a ton until 2030.
Carbon tax on imports:
The establishment of a carbon tax system at the borders of the EU is also planned in the new regulations. Through this instrument, the EU can fight against carbon leakage. That is to say, the exported pollution with the relocated and re-imported companies on the European territory.
They want importers to pay an additional cost, through the EU, of goods of which the production emits CO2.
Social Climate Fund:
Finally, it will be created from 2026 onwards, a social fund for the climate. It will be financed by the auctioning of ETS quotas (Emissions Trading System) and the ETS II. This fund will be provided with 86.7 billion euros for the period 2026 to 2032. It will be given to vulnerable households, to micro-enterprises and transport users.
What about digital?
Digital pollution is directly and indirectly generated by the daily use of our connected objects and offered services: computers, phones, smart watches, tablets, streaming platforms, websites, social networks, etc.
By this fact, it’s about a major environmental issue. Indeed, the internet consumes in 2022 about 15% of the global electricity. Digital pollution represents more than 6% of the global CO2 emissions.
But then, is digital included into the carbon market and its regulations?
The electric consumption of companies increases and their carbon footprint doesn’t decrease or just a bit. In particular the reduction of the carbon footprint of digital companies. These companies treat more and more data and transactions. They also use digital infrastructures more and more powerful (servers, cloud, antennas 4 and 5G, …) and consume more and more energy.
If nowadays the digital isn’t in the carbon balance studies, this is just a matter of time seeing the induced consumption of resources and energy. If some good practices such as the reduction of the emails carbon footprint, or the strategies integration of a sustainable If are relevant. The eco-design of digital services is also an important axis of increase.
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Conclusion
The EU acts as a pioneer into carbon regulation, and the establishment of incentive mechanisms to the reduction of these emissions. By expanding the concerned sectors specter by this regulation, it increases again the chances to reduce our global emissions.
Digital might be a complementary step in this mechanism and organizations that will be prepared will have a competitive advantage. Indeed, we don’t change an IT system or practices rooted in a few months. It needs years of sensibilization of teams and stakeholders. So by starting right now, the implicated organizations on a responsible digital approach will be ready, tomorrow, to these new regulations.
To prepare right now these evolutions, while optimizing the performances of your digital tools. Realize an audit of the carbon footprint of website with Greenoco. And for a more advanced support, contact us!
