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16th May 2022

MEPs set for crunch vote on EU carbon scheme

  • The ETS scheme covers some 11,000 factories and power plants in Europe. (Photo: Neil Williamson)

The European Parliament's two largest groups are split on how to reform the bloc's carbon-trading scheme, with US president Donald Trump's attitudes towards climate change affecting the debate.

The MEPs will vote on an overhaul to the emissions trading system (ETS) - the bloc's flagship climate tool - on Wednesday (15 February).

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  • A cement worker troweling the surface. (Photo: Abby flat-coat)

The scheme is seen as key to the bloc's efforts to reduce greenhouse gas emissions by 40 percent by 2030, but it has been plagued by problems.

Critics say carbon credits, the permits that companies have to buy to offset their emissions, are too cheap to buy and too many have been issued.

Swedish politician Jytte Guteland hopes parliament will stand by a deal she helped to push through the environment committee (Envi) last December, which could raise the price of permits from €5 to €25.

She said the presidency of Donald Trump, who has repeatedly cast doubt on global warming, made it even more important for Europe to show leadership in the fight against climate change.

"Our carbon market serves as a model for the rest of the world. Other countries will be looking at us when they make their own policies," Guteland told this website.

Some 11,000 European factories and power plants are covered by the scheme, which means they have to provide carbon permits for each tonne of carbon dioxide they emit.

While power companies are obliged to buy all their permits at auction, industrial companies get most of their carbon credits free of charge.

The idea is to give them incentives to minimise their emissions, because they can sell off any unused carbon permits at the market.

ETS was introduced 12 years ago and initially worked well. But prices plummeted after 2008 in the wake of the economic downturn, which caused a glut of credits on the market.

Under the deal backed by Guteland, the number of available permits should decline by 2.4 percent each year after 2020 to raise the price on emission permits.

The centre-right EPP group, however, has tabled an amendment to lower the rate to 2.2 percent.

EPP negotiator Ivo Belet told this website: "Our ambition is to find an agreement with the Council before the summer."

The Council, where EU governments are represented, favours a lower rate, and the two institutions need to agree on a final text.

The EPP group also wants to scrap the introduction of a carbon tariff, a measure intended to protect EU firms against imports from countries with lesser climate ambitions.

EPP sees the tariff as a protectionist measure that could even be against WTO rules.

But the tariff is the centrepiece of Guteland's compromise, along with a proposal to remove the rights of big polluters, such as the cement industry, from receiving free carbon credits.

The cement industry, meanwhile, feels it is being unfairly targeted.

"We have the impression that the discussion in the European Parliament is more about which sectors we keep in the free allowances and which not," Koen Coppenholle, the chief executive of CEMBUREAU, the European cement association, told this website.

"This seems to go away from the essence of the directive, which is how to incentivise emission reductions."

Guteland said the cement industry was rightly singled out.

"The current ETS system has been too lax to the European cement industry, which is today more polluting than competitors in Asia or Brazil," she said, referring to figures from the German Institute for Economic Research.

Green campaign groups such as Sandbag and Carbon Market Watch have called on EU lawmakers to stick to the compromise deal.

“The EU can now implement a pragmatic and politically feasible solution for boosting low-carbon cement in Europe and ending the scandal of enormous windfall profits to cement companies,” said Wilf Lytton, an analyst at Sandbag.

By the end of last week, the EPP group seemed united on its position, while other groups - especially the social democrats and the conservative ECR group - were more split.

"It will be a tight vote," said EPP's Belet.

Guteland remained hopeful that most groups would stick to the deal, which was adopted with broad majority in parliament's environment committee.

"It's a carefully tinkered compromise. You cannot just remove a part, or the whole deal could unravel," she said.

Ian Duncan, a British conservative MEP who is the main negotiator on the file, last week published a picture of a pair of boots stuck in a cement heap on his Twitter account.

"There may be trouble ahead... #EUETS plenary vote," he wrote.

A failure to reach a deal would sent everyone back to the negotiating table, he said.

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