Carbon Pricing for Upstream Emissions


The EU climate advisory board has recently published a report on necessary measures to achieve the net zero target by 2050. The EU Commission welcomed the insights highlighted in the report and stated that it will consider its recommendations while preparing for 2040 targets toward climate neutrality.

The report suggests that the EU should broaden the scope of its carbon pricing mechanism to cover emissions generated at the early stages in the supply chain in all predominant sectors, including fossil fuels and the agriculture and land use sectors. This expansion aims to address a more comprehensive range of emissions and contribute to meeting the EU’s carbon neutrality target.

Emissions from extracting and handling of fossil fuels and accounting for measuring emissions from land use and agriculture should not only be concerned with reducing emissions but also capturing carbon.

Alternative strategies such as carbon storage, hydrogen and bioenergy are recommended in the report for other processes that are challenging to mitigate with proposed carbon pricing mechanism.

The report also establishes that need for the EU to promptly implement the already approved climate action plan, noting that the planned electricity market reform, net zero industry act, and Critical Raw Materials Act provide a supportive environment for long-term investment opportunities in the development of renewable energy capacity, namely solar and wind power.