(Brussels/19.12.2022) 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 the transport and buildings sectors, and on the introduction of a new climate social fund. Outstanding issues relating to the carbon border adjustment mechanism (CBAM) were also finalized. The outcome of the negotiations sends a clear signal to industry to reduce its emissions.

Manuela Ripa, Member of the European Parliament for the Ecological Democratic Party (ÖDP), is delighted with the outcome of the negotiations: "The agreement on emissions trading is being described by many as 'historic'. You can always see the glass as half empty or half full - as someone directly involved in the negotiations, I see the outcome as positive. Within three years, we have managed to lay the legal foundations for the major goal of making Europe climate-neutral by 2050. The necessary reduction in CO2 emissions by more than 55 percent requires the abolition of free emissions certificates, which have so far rendered emissions trading toothless. We finally have a climate policy instrument to put an end to free pollution. The industry that pollutes the environment will be asked to pay and the industry that is on the way to ecological transformation will be supported. The agreement will cut the distribution of free CO2 allowances by half by 2030 and end it completely in key sectors by 2034. By supporting modernizing industries, we are safeguarding industrial jobs in Europe and laying the foundations for sustainable production in the EU. Although the phasing out of free emission allowances does not apply to all sectors for the time being, the agreement is nevertheless a good first step towards the energy and climate transition and a decarbonized industry. We can build on this and continue to fight for bold and socially just climate protection in the future "

The compromise also provides for the introduction of a second emissions trading system (ETS2) for buildings and transport from 2027. At the same time, a new social climate fund will be created, which will be used to the tune of 86.7 billion euros from 2026 for structural investments and to reduce households' energy bills, as the inclusion of the transport and buildings sectors will place a particular burden on socially disadvantaged households. Unfortunately, the EU member states were able to achieve a significant reduction in the scope of the Social Climate Fund envisaged in the Commission's original proposal during the negotiations. "Legal tightening must also be cushioned socially. This is precisely what was attempted with the creation of a social climate fund. It is now up to the member states to further increase the resources for this fund," said the ÖDP politician.

The carbon border adjustment mechanism, which Ripa negotiated with the Commission and the Council as shadow rapporteur for her Greens/EFA group over the last few months and for which an agreement was reached last week, is to be gradually introduced 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 EU industry. "Industry must prepare for an end to free pollution allowances. In return, it will be protected from cheap competition from abroad by a border adjustment tax for CO2, the Carbon Border Adjustment Mechanism (CBAM). These are tough but effective cuts, as they enable the entire global market to be greened. External costs are internalized for all imports into Europe. I was particularly pleased to be able to contribute ecological policy directly as my group's chief negotiator. With the outcome of the negotiations on the EU ETS, the final building block for the successful implementation of CBAM has finally been put in place," commented Ripa.

"We Europeans now have the decisive means at our disposal to turn our words into concrete action. Of course, the targets could have been even stricter, they can and must be improved over time. However, Europe has now delivered and can take on a pioneering role globally. Now the Member States must follow suit and shape the concrete implementation," concluded the MEP.

Background:

EU emissions trading is a central component of the Green Deal and the "Fit for 55" package to achieve the EU climate target of reducing the EU's net emissions by at least 55% by 2030 and making the EU the first climate-neutral continent by 2050. The agreement reached on Sunday morning provides for almost 50 percent of the free allocations of CO2 certificates to be canceled by 2030. From 2034, there will no longer be any free allocations at all for the sectors covered by CBAM. Initially, these are cement, iron and steel, aluminium, fertilizers, electricity and hydrogen. In 2030, the Commission will then examine the extension of CBAM to organic chemicals and plastics. The Parliament and the Council still have to officially confirm the outcome of the negotiations in the final stage.