EU member states and lawmakers yesterday announced an agreement for a major reform to the bloc’s carbon market, the central facet of its ambition to reduce emissions and invest in climate-friendly technologies.
The deal aims to accelerate emissions cuts, phase out free allowances to industries, and target fuel emissions from construction and transportation sectors, a European Parliament statement said.
The EU Emissions Trading System allows electricity producers and industries with high energy demands such as steel and cement to purchase “free allowances” to cover their carbon emissions under a “polluter pays” principle.
Photo: Reuters
The quotas are designed to decrease over time to encourage them to emit less and invest in greener technologies as part of the EU’s goal of carbon neutrality.
Negotiators representing member states and the parliament had spent more than 24 hours in intense talks before reaching an agreement on Saturday night that would widen the scope of the EU carbon market.
The deal means that sectors under the trading system must cut their emissions by 62 percent by 2030 based on 2005 levels, up from a previous goal of 43 percent.
The agreement also seeks to accelerate the timetable for phasing out the free allowances, with 48.5 percent phased out by 2030 and a complete removal by 2034, a schedule that caused fierce debates between lawmakers and member states.
The carbon market is to be progressively extended to the maritime sector, intra-European flights and waste incineration sites, depending on a favorable report by the commission, it said.
A “carbon border tax,” which imposes environmental standards on imports into the bloc based on the carbon emissions linked to their production, would offset the reduction of free allowances and allow industries to compete with more polluting non-EU rivals.
The agreement also aims to make households pay for emissions linked to fuel and gas heating from 2027, but the price would be capped until 2030.
The commission had proposed a second carbon market targeting building heating and road fuels, but the plan raised concerns as European households grapple with soaring energy prices exacerbated by Russia’s invasion of Ukraine.
If energy prices continue to spiral, the application of this part of the agreement would be delayed by a year, the statement said.
Proceeds from this second market would go to a “social climate fund,” which would support vulnerable households and businesses weather the energy price crisis.
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