New emission rules allow agri sector to ‘cancel and transfer’ allowances

The European Parliament’s approval of a key piece of legislation on 2030 climate targets has been welcomed as a “pragmatic” move by Sean Kelly, MEP for Ireland South and leader of Fine Gael in the European Parliament.

Speaking following the approval of the text by parliament this morning, Kelly – who was lead negotiator of the European People’s Party (EPP) Committee on Industry, Research and Energy for the legislation known as the ‘Effort Sharing Regulation’ – believes the final agreement which sets binding national emissions reduction targets for member states for the period 2021-2030 sets “the right balance”.

The key legislation – aimed at reducing emissions in transport, buildings, waste and agriculture in line with the EU’s climate target for 2030 – also brings some promising news on greenhouse gas emission challenges faced by Irish farmers.

Although agriculture currently accounts for more than 30% of total greenhouse gas emissions in Ireland –  under the newly-agreed and “more flexible” arrangements, Irish farmers will be able to achieve greater results as carbon sequestered from forestry and soils will be recognised for the first time.

‘Fair and just for farming’

Although Kelly admits that it was “a long and difficult road” to reach today’s decision, he believes the final agreement finds the right balance between having a high level of ambition to reducing greenhouse gas emissions; while, also ensuring unfair requirements are not put on farmers.

“In my work on this file over the past 18 months, I have stressed that we must strive to ensure that our actions to combat climate change go hand-in-hand with maintaining the competitiveness of our key sectors in Europe.

This was not the view shared by a number of MEPs in parliament, whose proposals would have decimated the European agricultural sector.

“Thankfully we were able to build strong majorities against the extremes and, with this agreement, we will ensure commitments under the Paris Agreement are fulfilled and that our transition to a low-carbon economy is done in a fair and just way.

“The economies of EU member states are not all the same. This needed to be taken into consideration in the 2030 target setting – which had not been the case with the 2020 targets.

‘A fairer system’

With this legislation, Kelly said the inclusion of two key provisions will make the system fairer.

Firstly, Ireland will be allowed to cancel allowances it has been given for emissions from power plants and heavy industry.

“In practice, this would mean Ireland would decide to have 4% less emissions in the power sector, deploy more renewable electricity instead, and then shift these emission allowances to the “Effort Sharing” sectors to give more leeway to agriculture, for example,” he said.

It is hoped that the flexibility will ensure that emission reductions are made where it is “cost-effective” to do so.

Additionally, he said the agreement, for the first time, properly recognises afforestation as a mitigation strategy.

Ireland can now incentivise our farmers to increase our forest cover and this will help us to meet our 2030 targets.

“Agriculture has an important role to play in combating climate change – this is clear.

“The agreement we have approved today – which is the product of almost two years of hard work – recognises that agriculture cannot be treated in the same way as energy and transport.

“This will help us to ensure our farmers can adapt and contribute effectively to the climate challenge ahead,” concluded Kelly.

What is Effort Sharing regulation?

The “Effort Sharing” regulation covers emissions reductions in sectors that fall outside the scope of the EU Emissions Trading System (ETS) which covers large power plants and industrial installations. Therefore it covers buildings, agriculture and waste management, among others.

The regulation will bring emissions reductions in the period 2021-2030 by way of nationally-binding emissions targets. Non-ETS sectors will need to reduce their emissions by 30% by 2030 compared to 2005 levels.

This 30% reduction in these sectors is in line with the EU’s overall aim to reduce emissions by 40% by 2030, compared to 2005 levels, as pledged under the Paris Agreement.

Each member state will have to comply with an emissions reduction path to make sure they decrease emissions at a constant pace throughout that period.


Current flexibilities under the Effort Sharing decision are preserved to help member states attain their annual limits.

They will be able to bank, borrow and transfer annual emission allocations between countries from one year to another within the 2021-2030 period.

Two new flexibilities are introduced in line with European Council guidelines. The one-off ETS flexibility will allow member states – which did not receive free allocation for industrial installations in 2013, or which are required to fulfil emission reduction targets above the EU average and their reduction potential – to cancel a limited number of EU ETS allowances.

Meanwhile, the new LULUCF flexibility will enable member states to make limited use of net removals from certain land use, land use change and forestry (LULUCF).

This will also include credits from managed forest land once the forest reference levels have been adopted under the LULUCF regulation and from wetlands when accounting for them becomes mandatory under that regulation.

How will Ireland benefit?

Ireland has been allocated a 30% reduction target for greenhouse gas reductions by 2030.

However, Ireland will benefit from the flexibilities laid out by the regulation as the country is permitted to cancel 4% of its EU-ETS allowances and transfer them to the Effort Sharing sectors in order to make it easier to comply with the reduction target.

Only a limited number of member states are allowed this flexibility – with Ireland and Luxembourg given 4% flexibility; while Belgium, Denmark, Malta, Netherlands, Austria, Finland and Sweden also qualify but are only given 2% flexibility.

Ireland may also take into account 26.8 million tonnes of carbon dioxide equivalent from LULUCF to offset its emissions.