(Brussels/12/21/2022) On Sunday morning, the European Parliament, the Council, and the European Commission reached an agreement on the revision of the European Emissions Trading System (ETS), which will be extended to cover transport and buildings, as well as on the introduction of a new climate social fund. The points of the CO2 border adjustment mechanism (CBAM) that were left open were also finalized. The outcome of the negotiations sends a clear signal to the industry to reduce their emissions.

Manuela Ripa, member of the European Parliament for the Ecological Democratic Party (ÖDP), is pleased with the outcome of the negotiations: “The agreement on emissions trading is perceived by many as “historic”. You can always consider the glass half-empty or half-full – as a person directly involved in the negotiations, I see the result as positive. Within three years, we have managed to lay the legal basis for our major goal – making Europe climate-neutral by 2050. The necessary reduction of CO2 emissions by more than 55 percent requires the abolition of the free emission certificates, which have so far made emissions trading completely ineffective. Finally, we have a climate policy tool to put an end to free pollution. The industry that pollutes the environment will be forced to pay the price and the industry that is on the path to ecological transformation will be backed. With this agreement, the distribution of free CO2 certificates will be cut in half by 2030 and should come to the end completely in key sectors by 2034. By supporting the modernizing industries, we will secure industrial jobs in Europe and lay the foundation for sustainable production in the EU. Although the expiry of the free emission certificates does not apply to all sectors for the time being, the agreement is still a good first step towards the energy and climate transition as well as towards a decarbonized industry. We can build on this and continue to fight for courageous and socially just climate protection in the future.”

The compromise also includes the introduction of a second emissions trading system (ETS2) for buildings and transport from 2027. In parallel, a new Climate Social Fund in the amount of €86.7 billion will be introduced starting in 2026. It aims to support structural investments and reduce household energy bills, as the inclusion of the transport and buildings sectors will place a particular burden on vulnerable households. Unfortunately, during the negotiations, EU member states managed to achieve a significant reduction in the size of the Climate Social Fund compared to the original Commission proposal. “Legal aggravations must also be cushioned socially. This is exactly what was attempted with the creation of a climate social fund. It is now up to the member states to further increase the resources for this fund,” said the ÖDP politician. 

The deal on the CO2 border adjustment mechanism, which MEP Ripa has been negotiating as shadow rapporteur for her Greens/EFA group with the Commission and the Council over the past months and for which an agreement was reached last week, is to be phased in from 2026. Imports of iron and steel, electricity, fertilizers, cement, and hydrogen will be subject to a carbon tax based on the emissions contained in these products, creating a level playing field for the EU industry. “Industry has to get ready for an end of free pollution certificates. In return, it will get protection from cheap competition from abroad through a border adjustment tax on CO2 through the CO2 border adjustment mechanism (CBAM). These are tough but purposeful cutbacks, as they enable the greening of the entire global market. External costs for all imports into Europe will be internalized. I was particularly pleased to be able to directly introduce ecological policy as the negotiator for my group. With the outcome of the negotiations on the EU ETS, the final component for the successful implementation of CBAM has finally been put in place,” notes MEP Ripa. 

“We Europeans now have the decisive means at our disposal to put our words into concrete action. Of course, the targets could have been even more ambitious, but that can and must be improved over time. Nevertheless, Europe has now delivered and can take on a pioneering role globally. The Member States have to follow suit now and work on the concrete implementation,” concluded the MEP.

Background:

The EU emissions trading system is a key component of the Green Deal and the “Fit for 55” package whose goal is to achieve the EU’s climate goal of cutting net EU emissions by at least 55 percent by 2030 and making the EU the first climate-neutral continent by 2050. The agreement reached Sunday morning calls for the elimination of nearly 50 percent of free allocations of CO2 allowances by 2030. From 2034 on, there will be no free allocations at all for the sectors covered by CBAM. Initially, these sectors consist of cement, iron, steel, aluminium, fertilizers, electricity, and hydrogen. In 2030, the Commission is looking at expanding CBAM to include organic chemicals and plastics. The Parliament and the Council still have officially confirm the result of the negotiations as the final step.