The EU ETS and the 2040 Climate Target

This study analyses how to realign the EU ETS 1 and EU ETS 2 to meet the EU’s 2040 target. For that we analyse the systems’ current configurations and test three emission scenarios to evaluate the effectiveness of different reform options to recalibrate the ETS 1 and ETS 2 to ensure the continuous functioning of both systems in reaching the 2040 and 2050 climate targets. These include both demand and supply side measures, such as lowering demand through steeper emission reductions, adjusting the LRF or including CDRs in the ETS.