EU lawmakers have voted for more ambitious carbon market reforms

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BRUSSELS – Lawmakers in the European Parliament’s Environment Committee on Tuesday voted for more ambitious changes than previously proposed in the EU carbon market, as they prepare to discuss reforms to the bloc’s core emission-cutting policy.

Europe’s carbon market forces power plants and factories to buy CO2 permits when they pollute. It has reduced emissions in these sectors by 43% since 2005, but is facing a restructuring to hit more ambitious EU climate change targets.

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A narrow majority of the committee supports a proposal to rapidly reduce the supply of permits to the carbon market, which will be reduced by 67% between 2005 and 2030. The European Commission, which drafted the EU law, proposed a 61% reduction.

Parliamentary groups such as the Greens, Socialists and Democrats, Renewal and the Left have backed the plan to reduce the supply of permits added to the market by 4.2% and increased the rate by 0.1 percentage points per year to ensure a sharp decline in emissions. One-to-one supply cuts will also apply to remove additional permits.

However, more ambitious changes could fight for majority support when the full EU Assembly votes on them in June. On Tuesday, Unicred analysts saw a “modest” opportunity for the whole parliament to approve them, but said they expected EU countries to resist.

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The majority of the committee has supported the changes to make it easier to intervene in the carbon market if prices rise. If CO2 prices for six months are on average twice as high as the previous two years, policymakers may consider adding more permits to the system.

The committee voted to stop free CO2 permits for industry by 2030, replacing carbon border tariffs on imports of polluting products. The commission proposed a more gradual free permit phaseout by 2036.

Lawmakers have voted to scale up plans to introduce a second emission trading system (ETS) to impose CO2 costs on fuel suppliers used in building and transportation, a proposal that has drawn opposition from some lawmakers and the country.

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The committee has agreed to apply the scheme to commercial companies from 2025 and will extend it to individual customers only in 2029 if certain conditions are met. It will be accompanied by a fund to protect the affected families at any cost

“While I was hoping for a bigger approach, I’m glad ETS II is alive and kicking,” said EPP lawmaker Peter Lies, the House’s chief negotiator on carbon market reform.

The committee will confirm his position with another vote later on Tuesday. EU countries will agree on their position on the reform next month, before countries and lawmakers discuss the final rules. (Reporting by Kate Abbott; Editing by John Chalmers and John Harvey)