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Brussels, 17 May 2022

  • Emissions Trading System reform: free allowances for industries phased out more quickly and citizens included later in ETS II
  • Broader scope and faster implementation in new carbon leakage instrument
  • Stricter trajectory, more transparency and less flexibility for member states’ greenhouse gas emissions in other sectors
  • New EU carbon sinks goal will increase EU 2030 reduction target to 57%

MEPs adopt their position on key EU draft laws to combat climate change by reducing greenhouse gas emissions by at least 55 % by 2030 and to protect jobs and citizens.

On Tuesday, the Committee on Environment, Public Health and Food Safety adopted five reports of the “Fit for 55 in 2030 package”. This is the EU’s plan to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels and have net zero greenhouse gas (GHG) emissions (climate neutrality) by 2050 in line with the European Climate Law.

The package adopted today is an important step towards the EU’s goal to become independent from expensive and polluting fossil fuels from Russia well before 2030.

Emissions Trading System reform

MEPs want to incentivise industries to further reduce their emissions and invest in low-carbon technologies. The Emissions Trading System (ETS) should be reformed, including:

  • New ETS II for buildings and road transport – citizens not to be included before 2029
  • Free allowances to be phased out from 2026 and disappear by 2030
  • A bonus-malus system to be introduced from 2025
  • Revenues to be used exclusively for climate action in EU and member states.

For more details, see the separate press release. MEPs have also adopted a report on the revision of the ETS as regards aviation.

Higher ambition in new carbon leakage instrument

MEPs call for a broader scope and faster implementation of the EU Carbon Border Adjustment Mechanism (CBAM) to prevent carbon leakage and raise global climate ambition, including:

  • Phasing in CBAM earlier and ending free allowances in EU ETS by 2030
  • Scope to be extended to include organic chemicals, plastics, hydrogen and ammonia as well as indirect emissions
  • EU budget to support least developed countries through amounts equivalent to sums collected through CBAM
  • Need for a centralised EU CBAM authority.

For more details, see the separate press release.

Stricter rules for member states’ greenhouse gas emissions in other sectors

MEPs also amended EU effort-sharing legislation, covering GHG emissions in sectors not included in the ETS, representing roughly 60% of EU emissions. For the first time, all EU member states would have to reduce greenhouse gas emission with targets ranging between 10-50%. MEPs call for more transparency and less flexibility to borrow, bank and transfer emissions allowances.

For more details, see the separate press release.

New EU carbon sinks goal will increase EU 2030 reduction target to 57%

MEPs agreed to increase the EU carbon sinks target for land use, land use change and forestry sector (LULUCF), which would de facto increase the EU’s 2030 GHG reduction target to 57%.

  • Carbon farming to deliver 50 million additional tonnes CO2-equivalent of net removals
  • MEPs want sub-targets for cropland, grassland and wetlands both at EU and member state level
  • GHG removals targets for 2035, 2040, 2045 and 2050 to be set by the end of 2024.

For more details, see the separate press release.

Next steps

A vote on the Social Climate Fund report is foreseen for Wednesday jointly with the Committee on Employment and Social Affairs.

All these reports, including those on CO2 emission standards for cars and vans and CORSIA adopted last week, are scheduled for a vote during the 6-9 June plenary session, after which Parliament will be ready to start negotiations with EU governments.

Parliament’s position on the Market Stability Reserve for the ETS was adopted by Plenary in April.

Further information ->

BusinessEurope: EP ENVI Committee vote on ETS and CBAM risks seriously undermining European competitiveness

(Brussels, 17 May 2022)

Today, the European Parliament’s environment committee (ENVI) voted on the reports for the reform of the Emission Trading Scheme and the Carbon Border Adjustment Mechanism, two of the most important files in the Fit-for-55 package. The ETS covers more than 11.000 industrial installations in the EU, and with this reform it will expand its scope to include flights leaving the EU, maritime shipping, as well as possibly buildings and road transport.

The CBAM is meant to address the problem of carbon leakage; to avoid  the relocation of industries to higher-emitting regions. This task is fulfilled so far by free allowances within the ETS. CBAM instead would place a fee on imported goods, equivalent to the embedded emissions.

Unfortunately, the European Parliament’s environment committee in its vote today chose to set unrealistic timetables and add disproportionate regulatory strain on European businesses, which are already battling record high energy prices, supply chain disruptions and inflationary pressures.

BusinessEurope Director General Markus J. Beyrer said:

“If today’s positions agreed by the European Parliament’s environment committee became law, European economy as whole would pay a heavy price, as the competitiveness of European industry would be undermined to an unprecedented extent.

By rushing from free allocation of emission allowances within the ETS to CBAM, placing a disproportionate burden on industry, and making the benchmarks unrealistically stringent, producers and employees all along the value chain would suffer. There would likely be a gap in carbon leakage protection, as we would have to rely solely on the CBAM, without a proper testing phase in place.

Exports from the sectors covered would not be taken sufficiently into account, threatening to destroy jobs in export-oriented industries and increasing global emissions by decreasing the market share of cleaner European products. The added layer of conditionality for free allowances via the new decarbonisation plans for instance will force companies to disclose granular information at installations level, without clear environmental benefits. Lawmakers in the Parliament’s plenary must urgently rectify the shortcomings in the position of the environment committee.”

Source – BusinessEurope (via e-mail)

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