On November 18, 2024, experts from the National Centre for Balancing and Managing Emissions (KOBiZE) and the Centre for Climate and Energy Analyses (CAKE), operating within the Institute of Environmental Protection – National Research Institute (IOŚ-PIB), participated in CAKE’s final event at COP29 in Baku. The event took place at the Greek Pavilion under the theme: “Powering Climate Action: Balancing Ambitious Targets with Effective Mechanisms for Emissions Reduction”.
The discussion, moderated by Maciej Cygler from CAKE, focused on the challenges related to the evolution of CO2 pricing systems and their role in achieving climate neutrality by 2050. Drawing on analyses from the LIFEVIEW2050 project, Maciej Cygler presented key points for discussion, including the observation that the expected shortage of allowances in the EU ETS serves as a solid starting point for discussing the potential further development of such mechanisms. Participants in the debate included Robert Jeszke, Deputy Director of IOŚ-PIB and Head of KOBiZE/CAKE; Krzysztof Bolesta, Deputy Minister at the Ministry of Climate and Environment; Kurt Vandenberghe, Director-General for Climate Action (DG CLIMA) at the European Commission; Gerassimos Thomas, Director-General for Taxation and Customs Union (DG TAXUD); and Simone Borghesi, Director of the Florence School of Regulation – Climate and President of the European Association of Environmental and Resource Economists (EAERE).
Kurt Vandenberghe identified obstacles to linking ETS systems globally, emphasizing the need for equivalence in structure and integrity. He cited the EU’s prior challenges with offset units (CERs) and underscored the priority of domestic emissions reductions. He noted the limited existing examples of linked systems—California-Quebec and EU ETS-Switzerland—and stressed that any linked systems must be equivalent in all aspects. While highlighting the challenges, he also pointed to the potential of the Carbon Border Adjustment Mechanism (CBAM) and carbon removal technologies to support global efforts under Article 6 of the Paris Agreement, while cautioning that removals must complement, not replace, mitigation efforts.
Gerassimos Thomas underlined the importance of long-term predictability in climate policy to build investor confidence. He likened carbon pricing mechanisms and CBAM to two sides of the same coin, noting their current focus on high-emission, energy-intensive sectors while urging that clean technologies must feel secure. He emphasized that revenue from carbon pricing mechanisms could be reinvested into decarbonization. Proper mechanisms, he argued, could stimulate private sector engagement in technology transfer and capacity building.
Krzysztof Bolesta proposed exploring both “hard” and “soft” ETS linkages and offset mechanisms to lower emission reduction costs while enhancing international cooperation. He highlighted that offsetting could unlock funding and incentivize emission reductions in jurisdictions with carbon pricing schemes.
Simone Borghesi addressed the unavoidable role of carbon dioxide removal (CDR) in achieving long-term reduction targets in the EU and globally. He emphasized the importance of timing and social acceptance, noting the diversity of CDR methods and the need to evaluate their advantages and drawbacks. He reiterated that CDR cannot replace mitigation measures.
Robert Jeszke connected these perspectives with CAKE and LIFE VIEW 2050 analyses, emphasizing the necessity of diverse climate policy tools. He supported carbon removal as essential for the future of ETS but acknowledged the current impracticality of linking systems outside the EU. He introduced the idea of establishing a European Central Carbon Bank (ECCB) to stabilize the EU ETS, mitigate costs, and support international cooperation under Article 6. Such a bank could help fund climate actions, ensure EU ETS resilience, and address challenges like rising carbon prices.
The event concluded with a shared understanding of the key challenges and opportunities for improving carbon pricing mechanisms. Participants emphasized the need for further development of climate policy tools that balance national and global approaches, ensuring an effective transition towards climate neutrality.
