🇮🇹 How Italy plans to kill the ETS 🇮🇹

🪓 Are you following how Italy is trying to break Europe’s most successful climate policy?

🫣 As an Italian myself, this is not easy to write. But it is necessary.

🏭 Here is how: under Article 6 of the just passed €3b “Decreto Bollete”, the Italian government would reimburse gas-fired power plants for the exact costs linked to ETS compliance.

📉 Without touching the ETS itself, Italy's move, if approved or replicated, could become a template that structurally undermines the carbon price trajectory that the EU's own modelling requires for net-zero.

⏸️ Then, just yesterday the Italian Minister for Enterprises Adolfo Urso said he will formally ask the European Commission to pause the ETS until changes are made to emissions benchmarks and allowance allocation rules, including delaying the phase-out of free allowances.

⚠️ So Italy is challenging the very existence of the ETS while showing ways to circumvent it domestically.

🇩🇪 Clearly, countries in Europe are stepping up their pressure ahead of the planned ETS reform this year. First Germany (as I reported last week - see comments), and now Italy.

🌍 This is extremely troubling: the ETS has already saved more than 2Gt of emissions. We have been operating it for 20 years and key components such as the CBAM are just ramping up. It is Europe’s ticket to a competitive, green, future-proof industry.

🇨🇳 Crippling or even demolishing it represents a populist, short-term move which will inevitably cede market share to China (and other smarter and forward-looking jurisdictions).

👋 For those in camp CDR who are rejoicing at the calls for more “flexibilities” - which includes CDR - by some of these countries: make no mistake. The ONLY way for CDR to make any sense in the ETS is if its cap and decreasing allowance mechanism is maintained as planned. If current populist demands get their way, say goodbye to CDR in the ETS.

✊ Is all hope lost? Absolutely not. The fight has just begun.

⚡ First and foremost, the EU needs to strike down the Italian law on the grounds of EU State Aid. The measure effectively subsidises fossil-fuel generation costs using revenues that would otherwise flow to the carbon market's price signal. 

📣 Second, we need to get big industrial players to lobby their own government that this is a bad idea. I know of at least one example where this is happening in a large EU member state, which is promising. We need dozens, hundreds more. If you work for a big European corporate, speak up against short-term populism and make the case for the ETS.

🔔 Finally, help spread this message: engage, like, share. Time to raise the alarm bells.

✉️ Want to cut through the noise? Stay up to date with the top 10 CDR policy news with my monthly briefing, The GigaTen: https://lnkd.in/d2BKe7gr

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