Mr. Noel Regan:

I will describe what the European Commission is proposing in terms of road transport and buildings. First, it is important to say that the current EU system for road transport and buildings falls within the effort sharing decision. Those two sectors plus agriculture and some others fall within the effort sharing decision which essentially means that each member state has a binding national target by which to reduce its emissions. Ireland's current national target is 30% by 2030. The Commission is proposing to keep the effort sharing decision and the national targets for these areas, but in addition it proposes to add this new system which provides carbon pricing for road transport and buildings. It is essentially a separate emissions trading system from the one currently in place for electricity generation and industry. It is completely separate with no linkages.

It is intended to commence from 2026 and, as pointed out by the Chair, it will not be applied at the point of emission as is currently the case for the ETS. Rather it is applied at the point of release of consumption of fuels. Essentially at the same place excise duty is applied, this new ETS system will be applied. That is where the monitoring and accounting would take place. What it does is that if a fuel supplier releases their fuel, they must have an equivalent certificate from the EU scheme, equivalent to the amount of emissions caused by that fuel. The certificates available will be limited over time, and they will reduce each year in order to reach minus 43% emissions reduction by 2030. This is a market which gets more scarce over time for the emissions to be released, which essentially puts a price on the carbon.

Another important point is that there will be a separate market stability reserve which will be used to dampen price fluctuations because it will be a market based mechanism so, unlike the carbon tax that is in place at the moment where there is price certainty, we can expect that carbon prices will fluctuate. That market will be in place from 2026. There will be a trial period of reporting only in the years 2024 and 2025. That is two years of testing followed by implementation from 2026, with a reducing amount of allowances available each year to 2030. Unlike the current system for large industry there will be no free allowances. Everybody must get an allowance for the fuel when it is released.

The emissions savings as a result of this will count against each member state's target but it is a separate complementary mechanism, as proposed by the Commission. It is not intended to replace the current member states' national targets for these sectors. That is an overview of the current position. I would note that member states have many questions in regard to how this will be applied and how it will work in practice, because it is quite a complex system to implement.