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Lawmaker Fight Derails EU’s Carbon Market Overhaul

Bloomberg
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June 8, 2022

By Ewa Krukowska and John Ainger (Bloomberg) —

The European Parliament failed to clinch a deal on the biggest overhaul of the bloc’s carbon market after lawmakers from three political groups unexpectedly refused to back the amended reform. 

The report on the emissions market — meant to set out parliament’s position for talks with member states on its final legislation — will now be sent back to the environment committee for further debate. That risks delays in the broader process to approve the European Union’s Fit for 55 package that would implement stricter climate goals for this decade.

The EU assembly voted Wednesday on amendments to the European Commission’s proposals to strengthen the Emissions Trading System. The Greens and Socialists considered the changes as weakening the reform too much, while the conservatives deemed them too ambitious.

“We are going to take this back to the committee and use that time to try and build a coherent common position,” said Iratxe García Pérez, president of the Socialists & Democrats group. “Let’s not put out traps and work on our own.”

The reform of the EU ETS, unveiled by the commission in July, is aimed at aligning the cap-and-trade system with a new climate goal of cutting emissions 55% by 2030. It’s set to bolster the program — which currently covers about 11,000 installations owned by manufacturers, power producers and airlines — and expand it to shipping.

Explainer: Shipping’s Inclusion in EU’s Carbon Market

In Wednesday’s series of votes, the parliament backed an improved mechanism to prevent carbon price shocks, supported stronger permit supply controls and voted to restrict financial investors’ access to the market to prevent speculation.

Scale Back

Christian Democrats and Liberals teamed up to scale back the pace of emissions reductions recommended by the environment committee last month. Their amendments were still more ambitious than the commission’s plan.

Lawmakers also favored a later date than that recommended by the Socialists and Greens for phasing out free emission permits when the carbon border levy is introduced. The end of the free allocation would still come sooner than the commission’s proposal. 

However, the rejection of the overall ETS report meant lawmakers also postponed votes on linked proposals to introduce a carbon border levy and a climate fund protecting the most vulnerable. 

Peter Liese, the lawmaker steering the carbon reform through the parliament, said the assembly could return to the matter at its next plenary meeting in June or in July.

“We don’t have a timetable yet but we want to do it fast,” Liese told reporters.

The proposals in the Fit for 55 package need approval by both the parliament and member states in the EU Council to take effect. France, which is chairing EU Council meetings in the first half of this year, wants to reach a deal on the position of national governments toward the end of June.

© 2022 Bloomberg L.P.

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