Source: Energy & Management Powernews, June 23, 2022
The vast majority of MEPs have spoken out in favor of more climate protection than the EU Commission has proposed. Now the ball is in the member states' court.
The Parliament had initially rejected a compromise on the climate package two weeks ago. The three largest groups, the conservative EPP, the social democratic S&D and the liberal Renew, but had then agreed on a new compromise. This has now been adopted largely unchanged with a broad majority of 439:157.
The Parliament's rapporteur, Peter Liese (CDU), called the decision "incredibly ambitious." He said the EU would reduce its greenhouse gases by 3.3% per year over the next eight years, compared to 0.8% per year over the past thirty years. In 2030, companies covered by the Emissions Trading Scheme (ETS) would emit 1.5 billion tons less CO2 than today, if Parliament's decisions were implemented unchanged. However, this is unlikely because the final text still has to be negotiated with the environment ministers of the member states. Negotiations will begin after the summer break.
"More air" for companies
The amendments made in Parliament are intended to slow the reduction of greenhouse gases by industry and the electricity sector over the next four years compared with the Commission's proposal. The move is intended to give companies "more breathing room" in light of the current energy crisis and the opportunity to invest in new, low-emission technology, Liese said after the vote. In turn, the pace of reductions would be increased thereafter, he added. Overall, sectors covered by the ETS would have to reduce their emissions by 63% by 2030, two percentage points more than envisaged in the Commission's proposal. Maritime transport will additionally be included in the ETS.
The roadmap for the introduction of a border adjustment levy CBAM (Carbon Border Adjustment Mechanism) and the abolition of free allowances for industry were also changed. The Commission had planned to introduce the CBAM in equal 10% steps over ten years starting in 2026. In return, the number of free allowances was to be reduced at the same pace. Parliament does not want to introduce the CBAM until 2027, and only wants to reduce the number of free certificates by 7% in the first year, with a further 9% in 2028. After that, their volume would be reduced more rapidly, and by 2032 there would be no more free allowances. However, this is subject to the CBAM meeting expectations and proving effective in protecting industry from third-country competition.
The parliament is also in favor of a bonus-malus system to give industry additional incentives to innovate technologically. Companies that reduce their emissions faster would continue to receive free allowances to finance their investments. Technological laggards, on the other hand, would have their free allowances cut more quickly.
The planned introduction of emissions trading for the transport and buildings sectors (ETS2) is to be restricted to commercial consumers, according to the parliament. Excluded are process emissions of small industrial enterprises. While the conservatives advocated a broad solution based on the German model, the ETS2 was rejected by the Social Democrats, the Greens and most liberals, citing the social consequences.
Whether the ETS2 can also be extended to private consumers is to be examined by the Commission in 2029 at the earliest. For this, a new law would have to be proposed and adopted. Germany could nevertheless stick to requiring emission rights for private consumption as well.
The energy policy spokesman for the Social Democrats, Timo Wölken, said he was glad that a compromise had been agreed on that "does not contain any social explosives." He said the climate social fund, which is to be set up as early as 2024 and financed by revenue from emissions trading, would cushion the social consequences of accelerated structural change.
Green MEP Bas Eikhout said in the parliamentary debate that his group would support the compromise of the three groups, even though it was not enough to reach the climate target of 1.5 degrees Celsius.
Author: Tom Weingärtner
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