End of free “pollution rights” for industrialists, taxation of emissions related to heating and cars, social funds for the transition… The EU reached an agreement on Sunday on a comprehensive reform of its carbon market, the heart of the European plan climate.
After around 30 hours of tough talks, negotiators from the European Parliament and EU member states have reached an overnight deal to raise ambition and expand the scope of the carbon market, according to a Parliament press release.
To cover their CO2 emissions, power producers and energy-intensive industries (steel, cement, etc.) in the EU must now buy “pollution certificates” in the European Emissions Quota Market (ETS), created in 2005, which covers 40%. of the continent’s emissions. The overall quotas created by states decrease over time to encourage them to emit less.
The reform proposed by the European Commission in July 2021 aimed to strengthen it in all directions in order to achieve the ambitious greenhouse gas reduction targets of the EU climate plan.
Under the agreement reached, the rate of cuts in proposed quotas will accelerate, with a 62% cut by 2030 from 2005 (compared to a previous target of 43%), meaning affected manufacturers will be de facto obliged to reduce their emissions Reduce 62%.
The carbon market will gradually be extended to the maritime sector, to emissions from intra-European flights (for which the currently allocated free quotas will be abolished) and from 2028 to waste incinerators (subject to a study grant granted by Brussels).
In return for the introduction of a “CO2 tax” at the borders, the EU will successively reduce the emission quotas that were previously distributed free of charge to European manufacturers in order to give them the opportunity to face non-European competition.
At least 48.5% of these free “pollution rights” will be phased out by 2030 and completely gone by 2034, a timeline that has been the subject of lively wrangling between lawmakers and states.
Another controversial point: the Commission proposed to create a second carbon market (ETS2) for heating buildings and road fuels.
Frightened by the social impact of such additional costs, MEPs called for this measure to initially be reserved for office buildings and trucks.
In the end, households will indeed pay a carbon price on fuels and on gas or oil heating from 2027, but this price will be capped until 2030 and if the current energy price increase continues, the application will be postponed by a year.
Notably, the proceeds from this new market will go towards a €86.7 billion (US$125.70 billion) “Social Climate Fund” created to help vulnerable households and businesses make the energy transition.