On Sunday, the European Union (EU) agreed on the bloc’s “biggest” climate law in history by vowing to cut emissions by 62% by 2030 and be carbon neutral by 2050, wherein it will reform its Emissions Trading System and adopt the Social Climate Fund.
“We just found an agreement on the biggest climate law ever negotiated in Europe,” stated Peter Liese, a German Member of European Parliament (MEP).
📍Details on establishing the Social Climate Fund to help most vulnerable Europeans cope with energy transition⤵️https://t.co/0BLfVA9opq pic.twitter.com/NjliMRBoQM
— ENVI Committee Press (@EP_Environment) December 18, 2022
“This deal will provide a huge contribution towards fighting climate change,” he said, noting that the new legislation “provides a clear signal to European industry that it pays off to invest in green technologies.”
According to the agreement, all of the carbon market’s revenues shall be spent on climate action, which Liese said was “one of the biggest wins of the Parliament.”
After 30-hour-long talks over the weekend, the bloc decided that the Carbon Border Adjustment Mechanism (CBAM) would cover the cement, aluminium, fertilisers, electric energy production, hydrogen, iron and steel sectors between 2026 and 2034. The European Parliament wanted it to be till 2032. However, the European Commission will instead review the CBAM’s impact before 2026 to assess whether additional measures are required.
With this night’s deal on revision of #ETS & brand-new #SCF, we made another step towards reaching our ambitious climate goals.
— Roberta Metsola (@EP_President) December 18, 2022
Thank you @Europarl_EN team led by @peterliese, @Esther_de_Lange & @DavidCasaMEP.
We are truly making Europe a benchmark for global players #Fitfor55 https://t.co/NDtdfTaUI6
The EU carbon market needs 10,000 power plants and factories to buy CO2 permits when they pollute, which is the biggest part of the EU’s ‘Fit for 55’ plan, meaning cutting emissions by 55% by 2030 from 1990 levels. This includes removing 90 million CO2 permits in 2024 and 27 million in 2026, as well as limiting the rate of CO2 permits to 4.3% from 2024-2027 and 4.4% from 2028-2030.
“From 2027 on, its crunch time. Everybody needs to reduce emissions by then or will have to pay a lot,” said lead negotiator Peter Liese. He expressed hope that the looming deadline would encourage greater investment in green energy.
A big step forward for our #EUGreenDeal 🌍
— EU Climate Action (@EUClimateAction) December 18, 2022
We agreed with @EUCouncil & @Europarl_EN to strengthen the #EUETS & create a Social Climate Fund to:
🟢cut industrial emissions further & faster
🟢invest more in clean tech
🟢help the most vulnerable cope with the transition#FitFor55
A second ETS was established for the building and road transport sectors “to ensure cost-efficient emissions reductions in these sectors that have been difficult to decarbonise so far.” The agreement also confirmed that the ETS will be extended to the shipping sector.
If energy prices soar, the new ETS will be postponed to 2028. Additional provisions will be put in plcae if the price of allowances exceeds €45 EUR ($47.8) once the system starts.
Additionally, the bloc established a Social Climate Fund worth over $92.1 billion from 2026 to 2032 in a bid to “support vulnerable households, micro-enterprises and transport users cope with the price impacts” of the new ETS for the construction and road transport sectors.
EU has reached a final agreement to raise a carbon price on the fuels used to heat homes and drive vehicles.
— Karl Mathiesen (@KarlMathiesen) December 18, 2022
A political experiment starting in 2027.
Also creates a fund to help poorer citizens to move to clean alternatives.
"Dedicated to the memory of Mauro Pettricione." https://t.co/7ZsXwNNMM5
Pascal Canfin, a French lawmaker and chairman of the Parliament’s environment committee, remarked that the agreement “will increase our industry’s climate objectives by almost 50%,” and that “the carbon price will be around €100 ($106.3)” once the reform is enforced, higher than the current €80-85 ($85-90). “No other continent in the world has such an ambitious carbon price,” he asserted.
In fact, the stricter regulations have already helped increase carbon prices to a record €99.22 ($105) per metric ton this year.
“The EU is leading the way in climate protection and is demonstrating determination – despite all the crises,” German Economy Minister Robert Habeck noted on Sunday. However, many lawmakers have accused Berlin of creating issues. “Germany desperately wanted the second carbon market and the inclusion of other fuels. They got it and they should celebrate, instead of celebrating, they created problems until the last minute,” Liese revealed.
Achieved - a deal for the biggest climate law ever!
— EPP Group (@EPPGroup) December 18, 2022
The #EUGreenDeal must bring innovation, security, strengthen competitiveness and safeguard and create European jobs.
The Innovation fund will be increased by 125 million!https://t.co/sa2JGd00Es#ETS #FitFor55 @peterliese pic.twitter.com/OcAPBG3Sbw
Meanwhile, Czech Minister for Environment Marian Jurečka called the deal a “victory,” saying, “We can now safely say that the EU has delivered on its promises with ambitious legislation and this puts us at the forefront of fighting climate change globally.”
Climate activists have criticised the agreement, saying that it isn’t enough to combat the climate crisis. “Sadly, even after this long-awaited reform, Europe’s carbon market will fail to deliver adequate emission reductions and it won’t ensure that the polluters pay. EU policymakers clearly have a lot of homework left to do,” claimed Sam Van den plas, the policy director at Carbon Market Watch.
Similarly, Klaus Röhrig, head of climate at CAN Europe, said the bloc “missed a critical chance to significantly ramp up its climate ambition.”
Likewise, Romain Laugier from WWF opined: “Unfortunately, the quality of a ‘climate action spending’ is still entirely up to Member States. It means they could continue as before, and use some of this money to subsidise fossil coal and gas.”
Amid a dire energy crisis, the EU has decided to raise energy prices even more by tightening its carbon trading system.
— Steve Milloy (@JunkScience) December 18, 2022
The weather will remain the same.
But Europe will be more of a disaster. https://t.co/1ftFD6Zh7P
Nevertheless, Green Party lawmaker Michael Bloss stressed that CO2 permits will be nearly halved by 2030 and totally removed by 2034. “The free pollution party is over, we are sending the industry on the modernisation course,” Bloss emphasised, adding, “The worst polluters pay extra and those who decarbonise are supported.”
Separately, on Sunday, countries that are part of the North Seas Energy Cooperation were supposed to sign a deal with the United Kingdom (UK) on expanding the construction of offshore wind power and electricity interconnectors, along with the production of hydrogen with renewable energy.