MEPs push forward emissions reform in major Fit For 55 climate step

MEPs agreed to revise the EU’s Emissions Trading System, to have industries reduce emissions by putting a price on greenhouse gas (GHG) emissions as an incentive, and invest in low-carbon technologies.

MEPs adopted the reform with 439 votes for, 157 against and 32 abstentions, to increase the European Commission’s overall ambition to reduce emissions in ETS sectors from 61% to 63% by 2030, compared to 2005.

To achieve this, there will be further one-off cuts to the EU-wide quantity of ETS allowances in circulation, while increasing the annual reduction of allowances to 4.4% until the end of 2025, rising to 4.5% from 2026 and to 4.6% from 2029.

A ‘bonus-malus’ system will incentivise best-performers and innovation, and reward the most efficient installations in a sector with additional free allowances. Those who do not implement the recommendations made in energy audits, do not certify their energy systems or do not establish a decarbonisation plan for their installations, will lose some or even all of their free allowances.

The ETS will also be extended to maritime transport, where MEPs want to cover 100% of emissions from intra-European routes as of 2024 and 50% of emissions from extra-European routes from and to the EU as of 2024 until the end of 2026.

From 2027, emissions from all trips should be covered 100% with possible derogations for non-EU countries where coverage could be reduced to 50% subject to certain conditions. MEPs also want GHG emissions other than CO2 to be included, such as methane nitrous oxides. 75% of the revenues generated from auctioning maritime allowances shall be put into an Ocean Fund to support the transition to an energy efficient and climate resilient EU maritime sector. Parliament also wants to include municipal waste incineration in the ETS from 2026.

Free allowances in the ETS sectors covered by the Carbon Border Adjustment Mechanism (CBAM) should be phased out from 2027 and disappear by 2032, when Parliament wants the mechanism to be fully implemented – three years earlier than foreseen by the Commission.

The free allowances should be reduced to 93% in 2027, 84% in 2028, 69% in 2029, 50% in 2030, 25% in 2031 and 0% in 2032.

A separate new emissions trading system for fuel distribution for commercial road transport and buildings shall be established on 1 January 2024 – one year earlier than proposed by the Commission.

But residential buildings and private transport should not be included in the new ETS before 2029 to prevent citizens from having to bear additional energy costs.

After the vote, rapporteur Peter Liese (EPP, DE), said: “Today is a big day for the climate. We will reduce four times more GHG emissions per year than we did from 1990 until today. Everybody who invests in climate mitigation will be supported, but those who just want to continue to pollute, will have a hard time. We will protect jobs and do what is necessary to save the planet for our children and grandchildren.”

Overwhelming support for Casa’s Social Climate Fund in European Parliament

The European Parliament overwhelmingly voted in favour of the Social Climate Fund, a multi-billion euro fund that was negotiated jointly by EPP MEPs David Casa and Esther de Lange.

Casa will now lead negotiations alongside de Lange, on behalf of the European Parliament, in negotiations with EU governments, represented in the Council of the EU.

“The Social Climate Fund is the EU’s multi-billion euro answer to shielding citizens from the effects of climate change on energy,” Casa said. “The strong result is a convincing signal of the need to ensure that the transition to climate neutrality should also be a socially just one.”

Billions are set to go toward investing in energy efficiency measures for households and micro-enterprises, as part of a plan to reduce energy demand and consumption. Lower energy use will help cut down on emissions and increase savings for families and businesses.

“Thanks to the Social Climate Fund, we will secure more solar panels, more insulation, more efficient appliances, more efficient and affordable public transport, and more electric cars.”

Casa explained that EU governments will implement measures to finance investments for citizens and provide relief for energy bills through direct income support.

The Social Climate Fund was voted in as part of the Fit-for-55 package, an array of legislation intended to achieve a 55% reduction in CO2 emissions by 2030. This is Casa’s second multi-billion euro regulation, having concluded negotiations for the European Social Fund last year.