Wednesday

17th Aug 2022

EU bulldozes through carbon trade reforms

  • Coal-dependent countries such as Poland trued to oppose the deal (Photo: Kris Duda)

Environment ministers agreed on a reform of the EU Emission Trading Scheme (ETS) on Tuesday (28 February), in a bid to bring the bloc in line with its commitments under the Paris agreement on climate change.

"It's a big success," said EU climate commissioner Miguel Arias Canete after the meeting. "A lot remains to be done but the spirit of Paris is with us."

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Only 19 of the 28 EU member states backed the ETS update despite the nice words.

Bulgaria, Italy, Croatia, Cyprus, Latvia, Lithuania, Poland, Romania and Hungary claimed throughout the day-long discussion that the overhaul would hurt their industries.

Some kept protesting even after the Maltese presidency declared a majority behind a compromise deal, as proposed by the Czech Republic.

"We feel fooled," said Poland's minister of environment Jan Szyszko.

ETS is the EU’s key policy for cutting emissions by at least 40 percent by 2030.

The scheme involves a market-based cap and trade system forcing 11,000 power-intense companies to hand in a carbon permit for every tonne of CO2 they emit.

The scheme was introduced in 2005 and initially worked well, but prices plummeted in the wake of the economic downturn, causing a glut of credits on the market.

Tuesday's deal would double the number of permits stored in the Market Stability Reserve (MSR), a sort of pool for surplus credits, and automatically cancel a number of MSR permits if their total number reached a certain threshold.

Such a solution was championed by France, Luxembourg, the Netherlands and Sweden.

However, ministers, under pressure from Germany, also said that well-performing industries could keep getting their carbon credits for free.

The EU Council went further than the European Parliament, which voted its stance on ETS two weeks ago.

The two institutions will now enter into negotiations, and hope to agree on a deal before the summer.

NGOs said the reform was not far-reaching enough.

Agnes Brandt, senior EU policy officer at Carbon Market Watch said: “Auctioning, not free handouts, is the default of a ‘polluter pays’ system. Companies have been using free pollution permits as a life support, thereby locking in emissions in Europe".

"Only smart policies leading to a strong carbon price signal will push industry to innovate and modernise, and guarantee their long-term global competitiveness," she added.

Brandt called on willing countries to implement complementary national measures to reduce emissions in Europe.

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