European lawmakers voted in favour of a deal to reform the EU’s carbon market after 2020 on Tuesday (6 February), as well as bolstering prices in the bloc’s flagship tool for reducing greenhouse gas emissions.
The new rules for the EU’s Emissions Trading System (ETS) were agreed in November after months of negotiations between the European Parliament and EU member states but still needed official approval by the Assembly.
535 were in favour of the deal piloted by British Conservative MEP Julie Girling, with 104 against and 39 abstentions. Member states will now also have a final vote on the ETS update, seen as a rubber-stamping exercise.
— Miguel Arias Cañete (@MAC_europa) February 6, 2018
Modest price increase
European carbon prices have risen 15% since negotiators first struck the deal in November and were trading at around €8.90 per tonne after the vote, a price critics say is still too low.
The EU’s cap-and-trade system suffers from too many permits, making it inefficient. The reform deal seeks to strike a balance between being ambitious and avoiding energy-intensive industries moving abroad to avoid regulation.
It will double the rate at which the scheme’s Market Stability Reserve (MSR) soaks up excess allowances, as a short-term measure to beef up prices.
In 2023, a new mechanism to limit the validity of allowances in the MSR will be put in place.
The overall cap on the total volume of emissions, known as the linear reduction factor (LRF), will be reduced annually by 2.2%.
The European Union aims to cut greenhouse gas emissions by at least 40% by 2030, as part of the overall Paris Agreement to avoid the worst consequences of climate change.
As things stand, the ETS reform has only one more hurdle to clear but a recent plan floated by EU Budget Commissioner Günther Oettinger on how to plug a €13 billion hole left by the UK after Brexit suggests the tinkering might not be over.
The German official said that shifting income generated by the ETS from national to EU level could help top up the bloc’s coffers, adding that the legislation is already located at supranational level.
MEP Girling warned that the idea could prove to be “politically toxic” given the effort needed to broker the final deal but added that she could support changing the ETS again if the income generated were set aside for climate action efforts.