Monday

20th Nov 2017

MEPs agree on future of emissions trading

  • Companies with installations have to hand in ETS credits for polluting. MEPs agreed on ETS rules for 2021-2030 (Photo: Otodo)

The European Parliament raised the bar on the EU's climate change commitments, after its environment committee on Thursday (15 December) broadly backed a more ambitious reform of the Emissions Trading System (ETS).

The proposal was adopted with 53 votes in favour, five against, and seven abstentions, and followed extensive negotiations between political groups over compromise amendments.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The ETS is the bloc's flagship tool for reducing greenhouse gas emissions by at least 40 percent to 2030, but it has been plagued by consistently low prices for carbon credits.

The reform is aimed at jacking up the price by making the carbon credits, or allowances, more scarce over time.

Companies with heavy industrial installations need to annually hand in carbon credits, or allowances, for every tonne of CO2 they emit.

Leading MEPs were elated after the vote.

"Today's vote gives us a clear mandate for further negotiations with the council," conservative ECR group's Ian Duncan, rapporteur for the file, told EUobserver after the vote.

The reform needs approval from both the parliament's plenary and the EU Council, where national governments meet.

"It's a strong signal to the world that we are ready to live up to our commitments under the Paris Agreement," Swedish MEP Jytte Guteland, responsible for the report on behalf of the centre-left S&D group, added.

The price for emitting a tonne of CO2 stood at some €5 on Wednesday, while many experts think a price of around €30 is needed to persuade industrial companies to switch to cleaner energy sources.

The reform is the first major legislative file on fighting climate change since world leaders agreed the first-ever global climate treaty in Paris last year.

Reducing the available credits

The package is based on three key components.

A main issue of contention was the linear reduction factor (LRF), which says by how much the number of available carbon credits should decrease each year.

The parliament decided to raise the LRF from 2.2 percent, as suggested by the commission, to 2.4 percent. "This will allow to raise the price of a unit from €5 to €25," Guteland said.


It changed the distribution of carbon permits among the 13,000 companies working under the scheme, reducing in particular many of the privileges given to the cement industry.

It also set up a Just Transition Fund, which will help minimise social costs of the transitions towards a green economy.

"I very strong believe in climate policy and its capacity to generate green jobs, but some can feel insecure about the transition. The fund will help to prevent inequalities," Guteland said.

EPP objections

ETS is the world's first, and largest, carbon permit market.

The most controversial point of the report was the LRF, which was raised despite the objections of the centre-right EPP group, raising concerns about the support for the deal at later stages of the process.

"But in the end, the EPP also voted for the report, and the cap is just a small part of the deal," Ian Duncan said.

'Pretty ambitious' deal

European Commissioner on Energy Union, Maros Sefcovic, spoke to a handful of journalists in Brussels ahead of the vote.

He said the compromise deal that was on the table in Strasbourg was “pretty ambitious”.

Sefcovic also noted he was “very optimistic” that MEP negotiations with the national government, needed for the new ETS rules to come into force, will be wrapped up next year.

“We have to remember we are preparing the system for the period between 2021 and 2030, so I think we will definitely manage,” said the Slovak commissioner.

He noted that it was widely recognised that the emissions trading system was “technically fine”.

“But of course, €5 per tonne is not a price which can drive innovation and phase out the most polluting fuels. Something must be done.”

Next: China

Sefcovic met with journalists alongside Christiana Figueres, former top climate diplomat for the United Nations.

She also said she saw consensus “that putting a price on carbon is and would be the most effective policy” to reduce greenhouse gas emissions.

“When you put a price on anything, you are disincentivising. And that's what we want to do. We want to disincentivise any carbon-intensive energy uses,” said Figueres, who until July chaired the UN Framework Convention on Climate Change.

She noted that Europe's emissions trading system has inspired other nations in the world to also adopt a similar scheme.

Most notably, China will introduce its ETS next year.

“Once we have a price of carbon in China, you have to understand that what that means is that there is an embedded price in almost everything that we use,” said Figueres, noting that many of our consumer goods are made in China.

“There is going to be an embedded price on carbon in a huge portion of the global economy. That is going to have a ripple effect throughout the rest of our economies.”

EU carbon credits drop below €6

Has EU's flagship climate tool still an influence on moving industry away from fossil fuels? Emitting a tonne of carbon dioxide in Europe has become 25 percent cheaper since the start of 2016.

Meat 'taboo' debated at Bonn climate summit

Animal agriculture is responsible for a significant share of the world's greenhouse gas emissions, but until recently it 'was an issue that was really brushed under the carpet'.

News in Brief

  1. European Banking Authority will move to Paris
  2. EU court threatens daily fine over Polish forest logging
  3. EU medicines agency will move to Milan or Amsterdam
  4. Amsterdam, Copenhagen, Milan in next round of EMA vote
  5. Three countries pull out of medicines agency Brexit race
  6. Schulz calls for new German elections
  7. EU Commission 'confident' on German stability
  8. EU adopts new border check rules

Stakeholders' Highlights

  1. Bio-Based IndustriesBio-Based Industries: European Growth is in Our Nature!
  2. Dialogue PlatformErdogan's Most Vulnerable Victims: Women and Children
  3. UNICEFEuropean Parliament Marks World Children's Day by Launching Dialogue With Children
  4. European Jewish CongressAntisemitism in Europe Today: Is It Still a Threat to Free and Open Society?
  5. Counter BalanceNew Report: Juncker Plan Backs Billions in Fossil Fuels and Carbon-Heavy Infrastructure
  6. Nordic Council of MinistersNordic countries prioritise fossil fuel subsidy reform
  7. Mission of China to the EUNew era for China brings new opportunities to all
  8. ACCASmall and Medium Sized Practices Must 'Offer the Whole Package'
  9. UNICEFAhead of the African Union - EU Summit, Survey Highlights Impact of Conflict on Education
  10. Nordic Council of MinistersNordic Council Calls for Closer Co-Operation on Foreign Policy
  11. Swedish EnterprisesTrilogue Negotiations - Striking the Balance Between Transparency and Efficiency
  12. Access EuropeProspects for US-EU Relations Under the Trump Administration - 28 November 2017

Stakeholders' Highlights

  1. Nordic Council of MinistersSustainable Growth the Nordic Way: Climate Solutions for a Sustainable Future
  2. EU2017EEHow Data Fuels Estonia's Economy
  3. Mission of China to the EUChina and EU Step Up Water Management Cooperation
  4. CECEMachinery Industry Calls for Joint EU Approach to Develop Digital Construction Sector
  5. Nordic Council of MinistersMale Business Leaders Gather in Copenhagen to Advance Gender Equality
  6. EnelNo ETS Deal Means It Can Still Be Strengthened
  7. EU2017EEEstonia Anticipates More Digital Cooperation With Sweden
  8. Mission of China to the EUChina Launches Campaign to Protect IPR of Foreign Companies
  9. European Jewish CongressEJC Condemns Attacks on Ruta Vanagaite and the Shredding of Her Books in Lithuania
  10. Bio-Based IndustriesDiscover the Future of the Bio-Based Economy. Register Now for the BBI Stakeholder Forum!
  11. European Free AllianceWelcome Catalonia!
  12. UNICEFGrowing Number of Unaccompanied Refugee Children in Greece in Need of Shelter