EU ETS reform focuses on industrial competitiveness, which is good for district heating but bad for waste management (Bernstein)
The European Commission released the EU ETS reform proposal, the core of which is to take into account industrial competitiveness and a more gradual decarbonization path.
The European Commission released the EU ETS reform proposal, the core of which is to take into account industrial competitiveness and a more gradual decarbonization path. The main measures include: adjusting the speed of emission cap reduction, extending the free quota period for industries covered by CBAM, and establishing an industrial decarbonization bank. At the same time, the Electrification Action Plan sets the goal of electricity accounting for 46% of final energy consumption in 2040, which will benefit the power grid, energy storage and waste heat recovery. The market's concerns about the EU's radical carbon reduction have eased, and this reform signal shows that the policy is more pragmatic. It will put cost pressure on waste management companies such as Veolia, while it will be good for district heating-related companies. One-sentence conclusion: The EU carbon market reform seeks a balance between climate goals and industrial competitiveness. This move is good for district heating and electrification-related companies that can provide decarbonization solutions, but it is negative for industries with rising costs such as waste incineration. Positives/negatives: It will benefit regional heating/cooling related companies and grid energy storage companies. This is negative for waste management companies such as Veolia, as cost pressure increases. Maintain Veolia's outperform and Engie market performance ratings. Catalysts: 1) The progress of the EU ETS reform proposal in the EU Parliament and Council; 2) Details of the establishment of the Industrial Decarbonization Bank and the first batch of projects.