The European Parliament and the European Council has provisionally agreed to strengthen the EU Emissions Trading System and to apply emissions trading new sectors
The European Commission has welcomed the provisional agreement reached with the European Parliament and European Council to strengthen the European Union (E.U.) Emissions Trading System (ETS), apply emissions trading to new sectors for effective economy-wide climate action, and establish a Social Climate Fund.
The deal aims to reduce net greenhouse gas emissions by at least 55% by 2030. At the same time, the Social Climate Fund will help to ensure that the transition is fair.
To complement the substantial spending on climate in the E.U. budget, Member States will spend the entirety of their emissions trading revenues on climate and energy-related projects and to address social aspects of the transition.
Taking it to twitter, the President of European Commission – Ursula von der Leyen tweeted,
I welcome the political agreement reached on the enhanced Emission Trading System for a faster transition.
— Ursula von der Leyen (@vonderleyen) December 18, 2022
And on the Social Climate Fund, for a fair transition.
Two cornerstones of our #EUGreenDeal
The E.U. ETS puts a price on CO2 and lowers the permitted level of emissions every year in sectors including power and heat generation, energy-intensive industrial sectors and commercial aviation. The Today’s agreement will help reduce emissions from the E.U. ETS sectors by 62% by 2030 as compared to 2005 levels. This represents a substantial increase of 19 percentage points compared to the 43% reduction under the existing legislation.
It will also expedite the reduction of annual emission from 2.2% per year under the current system to 4.3% from 2024 to 2027 and 4.4% from 2028. The Market Stability Reserve, which stabilizes the carbon market by removing surplus allowances, will be strengthened.
The deal also includes shipping emissions, making the E.U. the first jurisdiction to put an explicit carbon price on emissions from the maritime sector. To support Member States in their efforts to reduce emissions from buildings and road transport, and certain industrial sectors, a new separate emissions trading system will start from 2027 for relevant fuel use.
The agreement also increases the size of the Innovation and Modernisation Funds. The Modernisation Fund will support 3 additional Member States with their transition. The Innovation Fund will be expanded and will also be able to support the maritime sector’s decarbonization efforts.
Besides, the new Social Climate Fund will provide dedicated financial support to Member States to help vulnerable citizens and micro-enterprises with investments in energy efficiency measures such as home insulation, heat pumps, solar panels, and electric mobility. It will also be able to provide direct income support covering up to 37.5% of the new national Social Climate Plans. It will receive € 65 billion from the E.U. budget, plus 25% co-financing by Member States.
The agreement now requires formal adoption by the European Parliament and the European Council. Once this process is completed, the new legislation will be published in the Official Journal of the E.U. and will enter into force.
