04/19/2023
Source: Energy & Management Powernews
The European Parliament has finally adopted the core elements of the European climate protection program "Fit for 55".
By a large majority in Strasbourg, MEPs confirmed a reform of the existing emissions trading scheme (ETS1), an extension of emissions trading to the buildings and transport sectors (ETS2), the introduction of a carbon tariff (CBAM) based on ETS1, and the establishment of a Climate Social Fund (SCF) to combat energy poverty.
In recent months, Parliament and Council of Ministers negotiators had reached compromises on the individual directives and regulations (we reported). The reform of the ETS1 aims to reduce CO2 emissions from industry and the energy sector more quickly. The total volume ("cap") of emission allowances is to be 62 percent below 2005 levels in 2030. The annual reduction factor will be raised to 4.3 percent from next year and to 4.4 percent p.a. from 2028. In addition, the total will be cut by 90 million metric tons in 2024 and 27 million metric tons in 2026. The number of free allowances for industry will be gradually cut. From 2035, industrial companies will also have to buy all the necessary allowances at auction.
In order to prevent the exodus of industry, CO2-intensive imports of aluminum, fertilizer, steel, electricity, hydrogen and cement will be subject to a levy from 2026. The CBAM is intended to make up the difference between the costs of manufacturers in third countries that do not pay climate levies and European manufacturers. The amount of the levies will be determined by the Commission at a later date. Again, this will be phased in between 2026 and 2034.
Emissions trading for buildings (including small businesses) and transport ETS2- will come into force in 2027. A postponement of one year is then possible if energy prices remain high. The price per ton of CO2 is initially to be capped at 45 euros. To reach this price level, an additional 20 million certificates can be auctioned. The Parliament has thus taken into account the situation in the energy markets, which has changed dramatically since the Commission's proposal, said the Parliament's rapporteur, Esther de Lange, on the sidelines of the plenary session.
The Climate Social Fund SCF will be introduced in 2026 and is intended to help "vulnerable households" and small businesses finance the additional financial burdens resulting from the climate package. The funds will be used primarily to reduce their dependence on fossil fuels. While member states decide exactly which households and businesses will benefit, they must report on this in detail. The fund receives 65 billion euros from the proceeds of the ETS2. Its spending must be increased by 25 percent by member states.
Europe as the first carbon-neutral continent
The "Fit for 55" package will make Europe the first carbon-neutral continent, said Parliament President, Roberta Metsola, after the vote in Strasbourg. It will make the European economy more competitive and unlock new growth potential, she added. Parliament's rapporteur on emissions trading, Peter Liese (CDU), underlined the pact's contribution to financing the energy transition. For the first time, he said, it had been possible to ensure that a large part of the revenue from emissions trading, around 700 billion euros, would be used for climate protection. Large parts of the industry supported the compromises reached and were confident of surviving the implementation of the climate package.
For German consumers, he said, the ETS2 "does not create any additional burden" because the European requirements are already covered by German emissions trading for the transport and buildings sectors. However, the ETS2 creates "more fairness because all Europeans now participate equally in climate protection". For German SMEs, he said, this means greater competitiveness compared with Polish or French companies. For the use of funds from the German ETS2, the European regulations would bring more social justice, Liese continued.
This aspect does not currently play a role in Germany, but must be given greater consideration in the future when funds are used. The energy policy spokesman for the Greens, Michael Bloss, considers the CSF only a first step: "It must be massively increased in order to really relieve low-income households. We need a European climate money to straighten out the social imbalance." Without reservation, the Greens welcome the introduction of the CBAM: "In the future, companies will receive a bill if they want to continue to introduce CO2-intensive products into our market," said Green MEP Manuela Ripa.
The Socialist rapporteur of the Parliament, Mohammed Chahim, assumes that the EU will not be alone with its climate tariff: "CBAM will be the norm in a few years. If the Americans are investing billions to decarbonize their industry, they need to do something to level the playing field. And then they need a mechanism like this. That's the future."
Author: Tom Weingärtner
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