欧洲公用事业与清洁能源：碳德比赛——欧盟碳边境调节机制改革聚焦工业竞争力与渐进脱碳

European Utilities & Clean Energy: Carbon Derby - EU ETSreform focuses on industrial competitiveness with more gradualdecarbonization alongside the Electrification Action Plan.Overall, the package is broadly in line with recentpress reports andpointsto amoregradual decarbonisationpathway,whileplacing greateremphasis on industrial competitiveness.Theproposed reformcould alsoappearCo2price-negative increasing the future availability of co2 certificates vs current expectations. +49 69 7174418bartlomiej.kubicki@bernsteinsg.com +33158985916thibault.dujardin@bernsteinsg.con EU ETS Review-MainProposed Changes:The Commission's review seekstorecalibratethe EU ETSto align the system with the EU's 2040 and 2050 climate objectives, whileenabling a more gradual decarbonisation pathway.The proposal reflects a growingemphasisonindustrialcompetitiveness.Tosupporttheseobjectives,theCommissionhas proposed a range of reforms, including: a) a more gradual reduction in the ETSemissionscapfrom2031onwards;b)anextensionoffreeallocationforCBAM-coveredsectorsuntil 2038,comparedwiththe currentphase-out scheduleending in2034alongside aseparateproposal on benchmarks aims to increase free allocationto industryworth6bnfortheperiod 2026-2030;c)a reformoftheMarketStabilityReserve(MsR),includingthe endoftheautomatic invalidation ofallowancesheldinthe reserve,revisions to thethresholds governing allowance withdrawals and releases,and a reductionin the MSR intake rate from 24% to12% from2028; d)the creation of an IndustrialDecarbonisationBank(IDB),backedbyapproximately1oobnoffundingtosupportindustrial decarbonisation projects; and e)the inclusion of municipal waste incinerationwithintheEUETSfrom 2031. +34 915 893913jorge.alonso@bernsteinsg.com Rory Graham-Watson+44 20 7676 7093rory.graham-watson@bernsteinsg.com Ken-Ree Choong+44 20 7676 8243ken-ree.choong@bernsteinsg.com Specialist Sales Gareth Williams+44 20 77625256gareth.b.williams@bernsteinsg.com ElectrificationActionPlan:AlongsidetheETSreformpackage,theCommissionalsounveiled its Electrification Action Plan,setting an indicative targetto increase the share ofachievingthistargetcould supportthedeploymentof approximately120millionbatteryelectric vehicles(BEVs),compared with around8milliontoday,and 1o0 million heatpumps, versus roughly 30 million currently installed.A key objective of the Plan is to reducethe costgapbetweenelectricityandfossilfuels.The Commission alsoproposes a series ofmeasures to accelerate grid development,energy storage deployment,and demand-sideflexibility, while launching an Eu Waste Heat Initiative to promote waste heat recovery. Companyimpact:Fromasectorperspective,oneofthenotableproposals istheprogressive inclusion of municipal waste incineration within the EU ETS between 2031and2034. While this proposal had already been signaled in the press and EU communications,its implementation couldneverthelesscreatea headwindforwastemanagementoperatorssuch as Veolia,throughhighercarbon compliance costs.Conversely,the Commission isseekingto acceleratethedeploymentof district heating and cooling (DHC)infrastructurethrough its ElectrificationAction Plan and theforthcoming EU WasteHeatInitiativecreating potentialgrowthopportunitiesforcompanieswithexposuretotheseactivities,includingEngieandVeolia.Detailspage3. TheEuropeanCommissionon17 Julyunveiled itsproposalsforthereviewoftheEUETS,alongsidetheElectrificationAction Plan.Overall,thepackage isbroadly in linewithrecent pressreports and points toa moregradualdecarbonisation pathway,whileplacinggreateremphasison industrial competitivenessMontel reports that the proposed 3.7% Linear Reduction Factor (LRF)for the 2031-2035 period is slightly above the 3.4% rate proposed bythe centre-right EPP, while the proposed 1.7% LRFfor 2036-2040 is much lower than the party's earlierproposals.PeterLiese,theMEPexpectedtoleadnegotiationsfortheParliament,commentedthat"maybeweneedsomefinetuning but the direction is good"He added that he was"readyto present a draft report already in September"and consideredtheCommission'stargetof reachinganagreementon the reformsbyQ12027tobeachievable. afternoon of 17 July, with prices subsequently stabilising. The Commissionnotesthatsectors covered bythe ETShave reduced emissions byaround50% whilegenerating morethan27Obn of revenue.However,theCommission arguesthatchanged geopolitical and economic conditions requireamodernisationofthesystemtobettersupportcompetitiveness whilemaintaining emissionsreductions. ETS,duetoasteepincrease incarbonpricesatthebeginingoftheyeardrivenpartiallybyinvestmentfund longpositioning(see Exhibit 1 and Exhibit 2). In a context of anticipated supply tightness, CO2 prices surged to 92 per ton mid-January. Thissignificantrallypromptedsomeindustrialcompanies andpoliticians tocallopenlyforreformmeasures.Several Europeangovernments, includingthose ofGermany,Italy,Czech Republic,Austria,Slovakia,havebeen advocatingforareformoftheEuEmissionsTrading System (EUETS)tosafeguard industri