the main points of the European carbon market reform

Following tough talks, the European Parliament and the Member States of the European Union (EU) agreed on Sunday 18 December to review their ambitions in terms of reducing greenhouse gas emissions at the increase and to extend its scope. This multi-pronged reform, proposed in July 2021 by the European Commission, should make it possible to achieve the ambitious objectives of reducing greenhouse gas emissions of the climate plan of the Twenty-Seven. Here are the main provisions:

  • Ambitions raised from the carbon market

To cover their CO emissions2, electricity producers and energy-intensive industries (steel, cement, etc.) must now buy “pollution permits” on the European emissions quota market (ETS), created in 2005 and applying to 40% broadcasts from the continent. The total quotas created by the States decrease over time to encourage industry to emit less pollution. According to the agreement, the rate of reduction of the quotas proposed will accelerate, with a reduction of 62% by 2030 compared to 2005 (compared to a previous objective of 43%): overall, the manufacturers concerned will have to automatically reduce their emissions accordingly.

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“The price of carbon will be around 100 euros per tonne for these industries. No other continent has such an ambitious carbon price”rejoiced Pascal Canfin (Renew, liberals), president of the environment commission of the Parliament. “There is room for maneuver until 2026 to invest in low-carbon energies and improve energy efficiency. Afterwards, it’s the moment of truth: we will have to reduce our emissions by then, or pay a lot of money afterwards.”summarizes MEP Peter Liese (EPP, right).

  • New areas concerned, including the aviation, maritime and waste treatment sectors

The carbon market will gradually extend to the maritime sector, to emissions from intra-European air links and, from 2028, to waste incineration sites, subject to a favorable study by Brussels.

  • Households involved

This was the most controversial point: the Commission proposed to create a second carbon market (ETS2) for heating buildings and road fuels, in which suppliers of fuels, gas and heating oil would have to buy allowances for cover their emissions. Fearing the social consequences of such an additional cost, MEPs called for initially limiting this measure to office buildings and heavy goods vehicles. Finally, households will indeed be required to contribute for fuel and heating oil from 2027, but the price will be capped at 45 euros per tonne at least until 2030 and, if the current surge in energy prices continued, the entry into force would be postponed to 2028.

Manufacturing sectors not targeted by the current carbon market will also be affected. “The strict conditions we have set make the extension to households politically acceptable”judged Mr. Canfin.

  • A social fund for the climate

Revenues from the new market (ET2) will have to fully finance the transition. In particular, they will feed a “social fund for the climate”, endowed with 86.7 billion euros, created to help vulnerable households and businesses. “This fund will not be a blank check for the States. It will help vulnerable households in their energy transition, for example with subsidies for insulation or for greener transport”, assured MEP Esther de Lange (EPP, right). Moreover, the ” innovation fund » which financially supports companies will be increased to approximately 50 billion.

  • Free quotas gradually phased out

As a carbon tax at the borders increases, the EU will gradually eliminate the free emission quotas allocated so far to European manufacturers to allow them to face competition from outside Europe. The equivalent of 98.5 billion euros was distributed to them between 2013 and 2021, according to the NGO WWF.

At least 2.5% of these free “rights to pollute” will be abolished in 2026, then 10% in 2028, 48.5% by 2030, and they will disappear completely in 2034. On the other hand, so that they are not disadvantaged on the global market, a mechanism will be developed by 2025 to support European manufacturers exporting to non-EU countries without comparable carbon pricing. “This agreement will allow big polluters to continue to receive billions of euros in free allowances” for a decade, while “households will receive crumbs in comparison” regrets the coordination of the NGO Climate Action Network (CAN).

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The World with AFP

source site-29