‘Money time’ for EU carbon market reform in the European Parliament

"The EPP must start playing ball," said Pascal Canfin, the chairman of the European Parliament's environment committee. "The last thing we want is for such an important decision to depend on five votes in plenary,” he told EURACTIV. [multimedia.europarl.europa.eu/en…]

The lawmaker overseeing the adoption of a key package of EU climate legislation in the European Parliament has urged colleagues to stop fighting over the proposed reform, saying Europe must rise to the occasion in the current geopolitical context.

Pascal Canfin, a French centrist MEP who chairs the European Parliament’s environment committee, has warned against entrenched positions on the EU’s proposed carbon market reform and urged colleagues to show a spirit of compromise.

“The message I want to convey is that everyone must stop repeating their starting positions and enter a real phase of negotiation,” Canfin told EURACTIV, warning that failure to reach agreement on the package before a committee vote on 17 May would risk derailing the EU’s climate agenda.

“Without an agreement in the committee, the package can be reopened in all its dimensions in plenary. And I don’t think, given the climate emergency and the current geopolitical context, that we can afford to gamble with this,” he said.

“That would be like playing a coin toss with the future of the climate package,” Canfin warned saying the adoption of the carbon market reform risked hinging on as little as five votes in the Parliament’s plenary.

The EU’s emissions trading scheme (EU ETS) – which establishes the world’s largest carbon market – is often described as the crown jewel of European climate policy. It is now being revised to align the bloc with its new climate ambition of cutting global warming emissions by a minimum of 55% by 2030.

This week, parliamentary groups are holding three successive rounds of talks in order to find a compromise on the proposed reform of the EU ETS and three other related legislative files: the social climate fund, the carbon border adjustment mechanism and a proposal to regulate CO2 emissions form cars.

Peter Liese, a German Christian Democrat who is the Parliament’s lead rapporteur on the ETS, said MEPs will hold an open-ended meeting on Wednesday evening (4 May) during which lawmakers will convene “for as long as necessary” to find a common position.

After a committee vote on 17 May, the European Parliament will vote on the proposal during a plenary session on 6-9 June, opening the way for final talks with EU member states to conclude the reform.

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‘Progressive majority’ or ‘von der Leyen majority’?

To reach a compromise, Canfin said MEPs must avoid reproducing what happened with the text on CO2 emissions from cars.

During the negotiations in the committee, the centre-right European People’s Party (EPP) adopted a hard line on the proposal, which Canfin said amounted to “unravelling the climate ambition of the text initially proposed by the European Commission”.

According to Canfin, this tough position made negotiations with the EPP “impossible” and led the other political groups – the Left, the Greens, the Socialists and Democrats (S&D), and the centrist Renew Europe – to form a so-called ‘progressive majority’ on the text, without the EPP.

But while such a progressive majority would ensure passage of the carbon market reform in the Parliament’s environment committee, it will probably not be sufficient to pass the text in plenary, where the EPP’s support will be key.

“It is therefore necessary for the parties…to negotiate a compromise that will ensure stability for us in plenary,” Canfin said. “But that means the EPP must start playing ball. The last thing we want is for such an important decision to depend on five votes in plenary.”

European Commission President Ursula von der Leyen, a German Christian Democrat, has erected climate policy as the top priority of her five-year mandate, pushing through legislation to achieve climate neutrality by 2050 and reduce the EU’s emissions by 55% by 2030.

However, she was only confirmed into the job with a paper-thin majority in the European Parliament three years ago, relying largely on support from her own camp – the EPP – as well as the S&D and the centrist Renew group led by the French MEPs from President Emmanuel Macron’s party.

The same three-party coalition now needs to stand united on the proposed reform of the EU’s ETS in order to secure adoption of the reform in plenary, Canfin said.

“I would like to send a message to the Socialists and the EPP,” the French MEP told EURACTIV: “Let us maintain the strategy that has been ours from the beginning – namely to maintain a von der Leyen majority on the key texts, so as to enable Europe to move forward in this historic moment with a cool head.”

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For the moment, however, such a majority appears elusive.

The EPP and S&D have clashed over key aspects of the carbon market reform. While the EPP insists on putting a carbon price on emissions from transport and buildings, the Socialists and Greens have warned this will push up consumers’ energy bills and insisted on a bigger social climate fund to compensate the poorest households.

The Greens and Socialists say the fund should be separated from plans to create a new Emissions Trading Scheme for transport and buildings, which the EPP wants to see implemented in full.

The EPP, in turn, has adopted a hard line on the EU’s proposed carbon market reform. In a briefing with journalists last week, German Christian Democrat MEP Peter Liese, the Parliament’s leading lawmaker on the proposal, said the ‘progressive majority’ were pushing for too much ambition on the text.

“There is a strong demand by these groups to be much more ambitious and to have more than 61% emission reduction” from the sectors covered by the ETS, Liese said. This would mean that the EU “would substantially overachieve” its 2030 greenhouse gas reduction target of 55%, he added.

Liese challenged those demands, saying the EPP preferred sticking with the European Commission’s original proposal. “61% is very demanding and we shouldn’t overdo it, especially in this time of crisis, where we need to be independent of Russian gas as soon as possible.”

According to Liese, the war in Ukraine has made the EU’s climate goals more difficult to achieve in the short term, with EU countries getting ready to restart coal-fired power plants in case Russian gas supplies are cut off.

“At least for the next two, three years, I think we may be forced to use more coal to get rid of Russian gas,” said Liese. “And that will of course be a challenge for the ETS,” he said, advising against any move to increase the EU’s climate ambition.

That stance was questioned by Canfin, who said the EPP’s proposals on the four legislative texts currently on the table would fall short of the EU’s 2030 climate target.

“On all the elements of the climate package, we are witnessing a radicalisation of part of the EPP against the Green Deal,” Canfin told EURACTIV. “If we add up all the requests of the EPP on the four texts, we do not reach 55%. This is obviously unacceptable for us [Renew] and for the socialists”.

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Finding a middle ground

Conversely, Canfin said the Socialists must drop unrealistic demands to establish a climate social fund without the corresponding funding coming from the new ETS on transport and buildings.

“One cannot both reject the ETS2 and want an identical or even larger social fund. The money has to come from somewhere!” the French MEP said.

“So, everyone has to take a step in the direction of the other: On the one hand, the EPP must accept that the ETS2 proposal be recalibrated, starting more modestly” in order to take social considerations into account. “And for their part, the Socialists must accept that if the ETS2 is limited, the social fund must also be restricted.”

With the committee vote just 15 days away, the French MEP called on all political groups to show responsibility and agree a compromise by Thursday 12 at the latest.

“We are now entering the ‘money time’. And here, we have to find a landing zone. Because if the mindset is to refuse concessions until the last minute, then there is no agreement. There are starting positions that have to move,” Canfin said.

“At Renew, our strategy is simple: to be the guarantors of the von der Leyen majority and of Parliament’s climate ambition. This means that we cannot fall below the threshold of ambition set in the climate law, which consists in reducing greenhouse gas emissions by 55% by 2030.”

Not all in Parliament seem ready to compromise, though. One senior parliamentary source with knowledge of the EPP’s stance said many MEPs would prefer delaying the Parliament’s vote on the carbon market reform until September when there will be more clarity from EU countries about the bloc’s response to Russia’s war in Ukraine.

The source, who spoke to EURACTIV on condition of anonymity, said other lawmakers in Parliament do not necessarily share the level of ambition shown by the environment committee, which he compared to “a sect”.

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[Edited by Zoran Radosavljevic]

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