Latvia delays the adoption of EU emissions trading system reforms

Latvia’s parliament has twice delayed reviewing amendments to the “On Pollution” law, which aims to adopt EU Emissions Trading System (ETS) directive requirements, the Latvian Climate and Energy Ministry stated. The amendments align national rules with the EU ETS, clarifying obligations for energy, aviation and shipping operators, who are already compliant elsewhere in Europe.

The ETS principle is relatively simple: companies submit one emission quota per tonne of carbon dioxide emitted. Free quotas reduce costs for fossil energy, preventing price hikes for consumers, such as in heating tariffs.

Local shipping companies struggle to meet emission quota requirements without national regulations. Latvia administers 19 shipping firms, including foreign ones, required to submit quotas for last year’s emissions by 30 September. Some have voluntarily complied with EU rules, but unclear national guidelines create risks of misinterpretation. Others have not started due to absent regulations, the Ministry reported.

Delays also threaten free quotas for Latvia’s ETS operators, like district heating companies, hindering their climate neutrality plans. Eleven such firms submitted plans to access these quotas. The EU directive also plans to extend the ETS to buildings, transport, and small industries via a new ETS2 system. Delays risk losing 462.8 million euros from the Social Climate Fund, a new EU financial tool established in 2023, the Ministry highlighted.

“Failure to adopt the directive undermines Latvian and foreign companies’ ability to meet international obligations, including shipping and aviation firms under Latvian regulations,” said Climate and Energy Minister Kaspars Melnis. “I urge swift progress to protect Latvia’s businesses and society.”