Et is not often that a law is referred back to the relevant committees by the plenary session of the European Parliament. The “No” of the MEPs to the central instrument of the EU climate package, the reform of European emissions trading, in the middle of last week was a disgrace for the responsible MEP, the “rapporteur” Peter Liese from the CDU.
MEP Peter Liese is deeply involved in the details of EU emissions trading.
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Image: dpa
Since then he has worked all the harder to smooth out the gap. Liese was able to report completion on Wednesday. The night before, Christian Democrats, Liberals and Social Democrats had agreed on a compromise that is to be adopted by the plenum next Wednesday. The three factions have the necessary majority.
The Christian Democrats have moved towards the climate protectors. The level of ambition, i.e. how much emissions should fall for the companies concerned and how long they will receive free emission rights, will be at least slightly tightened. This is exactly why the vote failed last week, as the Greens and Social Democrats called for more ambition.
In ten years there will be no more free certificates
Industry should now only receive free emission rights until 2032 instead of until 2034, as previously intended by the Christian Democrats. At the same time, the new CO2 border tax (CBAM for short) is to be introduced from 2027 to 2032. In addition, the number of emission allowances allocated annually from 2029 will be reduced somewhat more. But that is ultimately cosmetic.
Overall, CO2 emissions in the sectors covered by EU emissions trading will continue to fall by 63 percent by 2030. “The climate protection ambitions remain very high, the new emissions trading leads to an annual quadrupling of the EU’s climate protection ambitions and at the same time protects against deindustrialization and secures and creates sustainable jobs,” said Liese on Wednesday.
“The result shows that it was right not to approve the report last week, which would have decisively watered down emissions trading,” said SPD MP Tiemo Wölken. Even the MEP of the Greens, Michael Bloss, who was not involved in the negotiations, was satisfied: “The fossil alliance in the European Parliament has broken up, the climate compass has been realigned.” He was therefore in favor of the Greens also voting for the compromise .
In climate protection, the EU relies on the cap and trade model
Emissions trading is the central instrument of EU climate policy. It should make a decisive contribution to the EU reducing emissions by 55 percent by 2030 compared to 1990. With emissions trading, it caps the annual CO2 emissions from industry, energy producers and parts of aviation. This affects a little more than 40 percent of all emissions.
Shipping will also be included in future. The companies concerned must show emission rights for their emissions. They are tradable. This can create a market price for a tonne of CO2, which provides incentives for companies to invest in green technologies.
Last July, the European Commission proposed cutting the number of emission allowances by 61 percent by 2030. So the compromise goes slightly beyond that. However, the number of emission allowances will initially be reduced less and later all the more.
Relief for companies because of the Russian war
This is also a reaction to the Ukraine war, which is forcing the EU to temporarily use more fossil fuels. However, the compromise falls well short of the 67 percent originally requested by the Environment Committee.
In the end, the most difficult question to clarify was how the industry can be protected in competition with competitors from third countries without comparable climate requirements. So far, it has received the majority of its emission allowances free of charge. However, this reduces the incentive to invest in green technology.
The EU Commission has therefore proposed gradually introducing a border tax for the emission-intensive sectors of cement, aluminium, fertilizer, iron and steel as well as electricity, which corresponds to the level of the CO2 prices in emissions trading, and to abolish the free emission certificates for these sectors. This is exactly what should happen from 2027 to 2032, but initially only in small steps.
Admissibility of the border tax has yet to be explained
“After all, we first have to wait and see whether CBAM is compatible with the rules of the World Trade Organization at all,” said Dutch Christian Democrat Esther de Lange. The CBAM border tax is also to be extended to plastic, chemical products and hydrogen, if the necessary data is available.
In order to also strengthen the export of products, industry should continue to receive free emission rights for the proportion of its production that is exported. Last but not least, Berlin has repeatedly demanded this. The Commission believes that this is in any case in breach of WTO rules. In case of doubt, the compromise therefore provides for the free emission rights for export to be limited to products that can be proven to be green.
The extension of EU emissions trading to buildings and transport proposed by the Commission had already been largely off the table. This should only apply to commercial customers. An extension to private customers is planned for 2029 at the earliest and is associated with high hurdles.
If the European Parliament adopts the reform of emissions trading in the coming week, it must then find a common position with the Council of Ministers. The Council of Ministers is due to decide its position on June 28th. The negotiations should therefore only be concluded in the autumn.
