Pollution – Photo by Johannes Plenio from Pexels
(STRASBOURG) – MEPs adopted reform of the EU’s Emissions Trading System including for aviation and maritime Tuesday, as well as the Carbon Border Adjustment Mechanism and a new Social Climate fund.
These were deals reached with EU countries in late 2022 on several key pieces of legislation that are part of the EU’s flagship ‘Fit for 55 in 2030’ package. This is the EU’s plan to reduce greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels in line with the European Climate Law.
The reform of the Emissions Trading System (ETS) increases the ambition of the ETS, as GHG emissions in the ETS sectors must be cut by 62% by 2030 compared to 2005-levels. It also phases out free allowances to companies from 2026 until 2034 and creates a separate new ETS II for fuel for road transport and buildings that will put a price on GHG emissions from these sectors in 2027 (or 2028 if energy prices are exceptionally high).
The Parliament has also adopted the rules for the new EU Carbon Border Adjustment Mechanism (CBAM), which aims to incentivise non-EU countries to increase their climate ambition and to ensure that EU and global climate efforts are not undermined by production being relocated from the EU to countries with less ambitious policies.
The goods covered by CBAM are iron, steel, cement, aluminium, fertilisers, electricity, hydrogen as well as indirect emissions under certain conditions. Importers of these goods would have to pay any price difference between the carbon price paid in the country of production and the price of carbon allowances in the EU ETS.
The CBAM will be phased in from 2026 until 2034 at the same speed as the free allowances in the EU ETS are being phased out.
The deal with member states to set up an EU Social Climate Fund (SCF) in 2026 to ensure that the climate transition will be fair and socially inclusive was adopted with 521 votes to 75 and 43 abstentions. Vulnerable households, micro-enterprises and transport users who are particularly affected by energy and transport poverty will benefit from this. When fully in place, the SCF will be funded from auctioning ETS II allowances up to an amount of 65 billion, with an additional 25% covered by national resources (amounting to an estimated total of 86,7 billion).
The texts now also have to be formally endorsed by the EU Council. They will then be published in the EU Official Journal and enter into force 20 days later.
Further information, European Parliament
Adopted texts will become available here (18.04.2023)
Procedure file: Emissions Trading System (ETS)
Procedure file: Carbon Border Adjustment Mechanism
Procedure file: Social Climate Fund
Procedure file: Revision of the EU Emissions Trading System for aviation
