Parliament demands deeper cuts to industrial emissions

Cement factories will no longer enjoy free carbon quotas. [Jorge Franganillo/Flickr]

Lawmakers in the European Parliament’s environment committee this week backed more ambitious carbon market reforms than those tabled by the European Commission. Convincing the plenary, and above all the member states themselves, to follow suit may prove more of a challenge, however. EURACTIV France reports.

After long months of deliberation, the European Parliament’s Committee on the Environment, Public Health and Food Safety on Wednesday (14 December) opted for tougher reforms to the EU Emissions Trading System (ETS), the quota market governing the CO2 emissions of 12,000 industrial sites around the EU.

The decision was followed by the adoption of a final amendment on Thursday (15 December), aimed at speeding up the pace of emissions reduction.

By backing the report, drafted by Scottish Conservative MEP Ian Duncan, lawmakers once again demonstrated that the Parliament is one step ahead of other EU institutions when it comes to ambition on climate action.

“We went right to the limit of what was possible by consulting all the parties,” the rapporteur said, adding that the proposed carbon market reform “honours our Paris commitments” signed in 2015.

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Provisions in the EU’s carbon market designed to help poorer countries move to low carbon energy are being abused to subsidise fossil fuels and need to be dropped, 31 organisations and networks campaigning to end coal have said.

Reeling in 1 billion quotas

The main ambition of the report is to increase the cost of polluting by withdrawing carbon quotas from the market. From 2021, 1 billion quotas will be taken out of the ETS, which MEPs hope will be enough to drive a significant price increase.

Each year, 12% of the quotas allocated are put into a stability reserve. But the planned reform would see this number doubled, on top of the withdrawal of 800 million quotas in 2021.

Even so, the number of carbon quotas in circulation is likely to remain above real emissions levels, taking the edge off any price increase.

News of the MEPs’ decision did not appear to have much of an effect on the carbon market on Thursday, with the CO2 quota price languishing at around €5 per tonne.

“In the early days of the carbon market we saw prices between €20 and €30 per tonne. This is the direction the price should take at the start of this period. But it is a market and the price signal will be determined spontaneously,” said Duncan.

The committee then adopted an amendment on Thursday morning, aimed at pushing industries to speed up their efforts to cut emissions. MEPs set the bar for emissions reduction at 2.4% per year, slightly higher than the Commission’s proposal of 2.2%.

ETS emissions fall as EU cuts surplus carbon quotas

Greenhouse gas emissions from the main sectors covered by the European carbon market fell between 2014 and 2015, according to the European Environment Agency (EEA). EURACTIV’s partner Journal de l’Environnement reports.

Christmas comes early for some industries

For the Greens, this agreement represents a step in the right direction compared to the European Commission’s original proposal. But Dutch Green MEP Bas Eickout pointed out that some energy-intensive sectors, such as steel and fertiliser manufacturing, would still receive significant compensation.

“The compromise is a big Christmas present to our worst polluters. A new €10bn subsidy scheme will be established for our most energy-intensive industries,” the lawmaker said.

Polish coal will also get off lightly under the proposed reform, unlike the cement industry, which will have its quota handouts slashed. The sector had previously been the biggest beneficiary of free quotas, much to the dismay of environmental NGOs.

Another criticism levelled at Duncan’s report regards a new mechanism designed to transfer some of the funds raised by the auctioning of carbon quotas to the least developed countries, to support their efforts against climate change.

Multi-billion EU carbon market fraud operated from Poland

The founder of Poland’s biggest carbon quota brokerage firm, whose name appeared in connection with the Panama Papers, has been found guilty of VAT fraud and sentenced to jail in France. Warsaw denies wrongdoing, calling the multi-billion fraud an “unfortunate incident”. EURACTIV France reports.

While the initiative was broadly welcomed, it was also subject to sharp criticism from Oxfam. “The poorest countries, which bear no responsibility in global warming, are left with nice words, but with no assurance,” the NGO stated.

The report makes no mention of a binding objective for these transfers. Oxfam called for a commitment to allocate 10% of funds raised through the sale of carbon quotas to the Green Climate Fund.

What next for the proposal?

While the report adopted by the committee is generally seen as ambitious, it is unlikely to make it through the next stages of ratification intact. The European Parliament as a whole will examine the proposal at its February plenary session.

“The environment committee is traditionally more ‘green’ than the Parliament as a whole, securing endorsement by the entire Parliament will be a challenge,” Duncan said. The Scot added that he was confident MEPs would want to send a strong message to the member states’ governments.

France aims to set carbon price of at least €50 by 2030

France has confirmed it will introduce a floor price for carbon emissions from coal power stations, which will increase from around €20 in 2020 to €50 in 2030. EURACTIV’s partner Journal de l’Environnement reports.

Convincing member states to back this response to the EU’s Paris Agreement commitments may turn out to be another game entirely.

“In the end, the decision will be in their hands. And with Brexit and the French and German elections on the horizon, the subject could well be relegated to the back burner. But France, like Germany and the United Kingdom, is a climate leader,” Duncan said.

He hopes to see trialogue negotiations on the reform concluded next summer.

Created by the European Union in 2005, the Emissions Trading System has since been emulated around the world. But the European carbon market's low prices mean is not necessarily among the most efficient. The idea of linking the European carbon market to its Canadian, American or Chinese equivalents is a possible long-term plan.


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