Eurocrats Sending Europe To Carbon Score System, Each Human Will Get A Carbon Score
‘Everyone in Europe will pay for CO2 emissions’
Climate change: Deal on a more ambitious Emissions Trading System (ETS)
– Emissions in the ETS sectors must be cut by 62% by 2030
– Free allowances to industries will be phased out from 2026 and disappear by 2034
– An ETS II for fuel emissions from the building and road transport sectors as of 2027
On Saturday night, MEPs and EU governments agreed to reform the Emissions Trading System to further reduce industrial emissions and invest more in climate friendly technologies.
The EU Emissions Trading System (ETS), which enshrines the “polluter pays” principle, is at the core of European climate policy and key to achieving the objective of EU climate-neutrality. By putting a price on greenhouse gas (GHG) emissions, the ETS has triggered significant reductions in EU emissions, as industries have an incentive to reduce their emissions and invest in climate friendly technologies.
Increased ambitions for 2030
Emissions in the ETS sectors must be cut by 62% by 2030, compared to 2005, which is one percentage point more than proposed by the Commission. In order to reach this reduction, there will be a one-off reduction to the EU-wide quantity of allowances of 90 Mt Co2 equivalents in 2024 and 27 Mt in 2026 in combination with an annual reduction of allowances by 4.3% from 2024-27 and 4.4% from 2028-30.
Phasing out free allowances to companies
The free allowances to industries in the ETS will be phased out as follows:
2026: 2.5%, 2027: 5%, 2028: 10%, 2029: 22.5%, 2030: 48.5%, 2031: 61%, 2032: 73.5%, 2033: 86%, 2034: 100%.
The Carbon Border Adjustment Mechanism (CBAM), on which MEPs reached an agreement with EU governments earlier this week to prevent carbon leakage, will be phased in at the same speed that the free allowances in the ETS will be phased out. The CBAM will therefore start in 2026 and be fully phased in by 2034.
By 2025, the Commission shall assess the risk of carbon leakage for goods produced in the EU intended for export to non-EU countries and, if needed, present a WTO-compliant legislative proposal to address this risk. In addition, an estimated 47.5 million allowances will be used to raise new and additional financing to address any risk of export-related carbon leakage.
An ETS II for buildings and transport
A separate new ETS II for fuel for road transport and buildings that will put a price on emissions from these sectors will be established by 2027. This is one year later than proposed by the Commission. As requested by Parliament, fuel for other sectors such as manufacturing will also be covered. In addition, ETS II could be postponed until 2028 to protect citizens, if energy prices are exceptionally high. Furthermore, a new price stability mechanism will be set-up to ensure that if the price of an allowance in ETS II rises above 45 EUR, 20 million additional allowances will be released.
Financing the green transition
More money will be made available for innovative technologies and to modernise the energy system.
The Innovation Fund, will be increased from the current 450 to 575 million allowances.
The Modernisation Fund will be increased by auctioning an additional 2.5% of allowances that will support EU countries with GDP per capita below 75% of the EU average.
All national revenues from auctioning ETS allowances shall be spent on climate related activities.
MEPs and Council also agreed to establish a Social Climate Fund for the most vulnerable. A more detailed press release on this is available here.
Inclusion of emissions from shipping
As requested several times by Parliament, the ETS will, for the first time, be extended to maritime transport. You can read more on this part of the agreement here.
Market Stability Reserve
24% of all ETS allowances will be placed in the market stability reserve to address possible imbalances between the supply of and demand for allowances in the market due to external shocks such as those caused by COVID-19.
EU countries must measure, report, and verify emissions from municipal waste incineration installations from 2024. By 31 January 2026, the Commission shall present a report with the aim of including such installations in the EU ETS from 2028 with a possible opt-out until 2030 at the latest.
After the deal, rapporteur Peter Liese (EPP, DE), said: “This deal will provide a huge contribution towards fighting climate change at low costs. It will give breathing space for citizens and industry in difficult times and provide a clear signal to European industry that it pays off to invest in green technologies.”
An online press conference is scheduled for Monday 19 December at 10.30 CEST. More information on how to follow it here.
Parliament and Council will have to formally approve the agreement before the new law can come into force.
The ETS is part of the “Fit for 55 in 2030 package”, which is the EU’s plan to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels in line with the European Climate Law. MEPs have already negotiated agreements with EU governments on CBAM, CO2 cars, LULUCF, Effort Sharing and ETS aviation.
EU agrees carbon market overhaul in bid to hit 2030 climate goal
“The carbon market reform is a major part of the Green Deal,” said Pascal Canfin (not pictured), a French lawmaker who chairs the Parliament’s environment committee. According to Canfin, “the carbon price will be around €100” after the reform, up from €80-85 currently.
European Union negotiators reached agreement early on Sunday morning (18 December) to reform the EU’s Emissions Trading Scheme (ETS), the biggest carbon market in the world and the bloc’s flagship climate policy instrument.
The ETS currently caps the emissions of around 10,000 factories and power plants, allowing those with surplus credits to make a profit by selling CO2 permits on the market.
The scheme is now being extended to cover more sectors of the economy in order to align with the EU’s 2030 climate goal – a commitment to reduce net emissions by 55% before they are eventually brought down to zero by 2050.
“This deal will provide a huge contribution towards fighting climate change,” said Peter Liese, a German lawmaker who steered negotiations on behalf of the European Parliament.
The reformed scheme “provides a clear signal to European industry that it pays off to invest in green technologies,” he added, saying the reformed EU carbon market now “covers almost all the sectors of the economy” after a decision was made to extend the scheme to maritime emissions and waste incineration.
EP negotiators have reached a deal with @EU2022_CZ & @TimmermansEU on a reform of the Emissions Trading System #ETS & the creation of new Social Climate Fund #SCF #Fitfor55 pic.twitter.com/qg7rNZRYgJ
— ENVI Committee Press (@EP_Environment) December 18, 2022
Under today’s agreement, sectors covered by the ETS will have to cut their emissions 62% below 2005 levels by 2030 – a significant increase on the current 43% target.
“The carbon market reform is a major part of the Green Deal,” said Pascal Canfin, a French lawmaker who chairs the Parliament’s environment committee. “Thanks to the agreement reached this weekend, we will increase our industry’s climate objectives by almost 50%,” he said.
According to Canfin, “the carbon price will be around €100” after the reform, up from €80-85 currently. “No other continent in the world has such an ambitious carbon price,” he said.
A separate carbon market is also being created for buildings and road transport. This second ETS will start applying as of 2027 and will be accompanied by an €87-billion social climate fund to compensate households for the extra costs this will create.
This new carbon price on heating and transport fuels will be capped at €45 per tonne in a bid to prevent social discontent and rising energy bills. And if energy prices are exceptionally high, the new scheme will be delayed by a year, until 2028.
A key flashpoint in the negotiation was to preserve the competitiveness of industries like chemicals, cement and steelmaking which currently receive most of their CO2 permits for free – an incentive to help them decarbonise and invest in green technologies.
The scheme was heavily criticised by environmental groups who said big polluters were making huge profits from the ETS without making the corresponding green investments.
Under today’s deal, free allowances will be entirely phased out by 2034 and almost cut in half by 2030 (48.5%).
They will be gradually replaced by a new carbon tariff at the EU’s border, which aims at protecting European companies from imports of cheaper products coming from countries with lower environmental standards.
The new tariff will mirror the price on the EU’s own carbon market and will initially apply to imports of iron and steel, cement, aluminium, fertilisers and electricity as well as hydrogen.
But steelmakers are wary of the EU’s new border levy, saying it won’t make pricier European steel more attractive on global markets.
The phase-out of free allocations “risks wiping out a large part of EU steel exports worth €45 billion if no concrete export solution is found before 2026” when the new carbon tariff starts applying, warned Eurofer, the European steel association.
The ETS deal also comes with extra cash for industry, including a bigger innovation fund for state-of-the-art investments in green technologies and a modernisation fund to support industries in lower-income EU countries.
In total, “nearly €50 billion will be available to support innovation and accelerate the decarbonisation of companies,” Canfin said.
And to protect EU industries from wild fluctuations in the carbon price, 24% of all ETS allowances will be placed in a market stability reserve that will release CO2 permits to cool down the market in case the carbon price gets too high.
On the European Parliament side, the deal is backed by all political groups except the far-right, Liese said, with the centre-right EPP, the left-wing S&D, the centrist Renew, the Greens and conservative ECR all supporting it.
The provisional deal now needs to be confirmed by the EU member states and the European Parliament, which will hold a plenary vote in January or February, Canfin said.
Environmental groups disappointed
WWF, the green conservation group, was critical of the deal announced this morning, saying it falls short of what is needed to keep the rise in global temperatures below 1.5°C.
“This would have been a good deal ten or twenty years ago, but in 2022 it’s too little too late,” said Alex Mason from the WWF’s European Policy Office. “To fix this and to be sure the 2030 target is met, ETS sectors should reduce their emissions by at least 70%,” the WWF said in a statement.
WWF was particularly critical of the agreement to phase out free allowances to industry, saying it the pace is “far too slow”, with a full phase out happening only in 2034.
“The free allocation of emissions allowances will be made conditional on investment in techniques to increase energy efficiency. However, if a company does not comply, it will still receive as much as 80% of its previously allocated free allowances,” the WWF remarked.
CAN Europe, another NGO, echoed those criticisms but also welcomed moves by lawmakers making it obligatory for EU governments to earmark 100% of their carbon market auction revenues for climate-friendly investments.
“EU countries will now have to spend all their ETS cash on climate action, and this is definitely a step forward,” agreed Romain Laugier from WWF. “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,” he said.
Green lawmaker Michael Bloss defended the agreement, saying it will incentivise investments in green technologies.
“The free pollution party is over, we are sending the industry on the modernisation course,” Bloss said, reminding that free allowances will be almost halved by 2030 and completely eliminated by 2034.
“The worst polluters pay extra and those who decarbonise are supported,” the German Green MEP said.
Everyone in Europe will pay for CO2 emissions
Last night, after long negotiations, the bullet went through the church: residents of the European Union must pay for the greenhouse gases they emit. This means that every time you refuel and if the heating is switched on, you have to pay because of the harmful substances that are released as a result.
People who insulate their house well, buy a heat pump or switch to an electric car can receive a subsidy from a special fund. There will also be money for people who have less to spend, also as a result of inflation. More than 86 billion euros is available in that fund.
CO2 emissions must be more than halved
The measures are part of a package of climate laws. Before 2030, CO2 emissions must be reduced by 55 percent. European industry, which already partly has to do this, will have to deal with higher emission costs, and companies from outside Europe will pay for their emissions at the border. The money raised with this can be spent on climate plans.
Citizens and companies will have to pay for the CO2 from the exhaust and the chimney. This goes through energy companies and pumping stations. They have to pay for emission allowances and then charge the costs to the customer who comes to fill up or turn on the gas heater.
“I am pleased that a balanced agreement has been reached on the largest climate legislation package in the EU ever,” says Esther de Lange (CDA) MEP. She was one of the negotiators and responsible for the coordination of the Green Deal and chief negotiator on the Social Climate Fund.
“With this deal we are drastically reducing emissions in Europe, but in a socially responsible way without harming European industry. The introduction of ETS for transport and buildings is necessary to achieve our climate goals. This can be done not without social measures to help people make this transition, as European businesses and households are already facing exceptionally high energy prices.”
In recent days there has been consultation about three major climate plans, which had to be coordinated: CBAM, ETS and the Social Climate Fund.
In Europe, heavy industry companies are only allowed to emit emissions for which they have CO2 certificates. This is called the emissions trading system ETS (see the image below). Each year, the EU determines how many of these so-called CO2 certificates may be distributed among the industry. The amount of allowances that are distributed decreases every year, so that European emissions go down.
Companies are allowed to trade with those rights, hence the name emissions trading system. If a company produces economically, then that company can sell the other certificates to polluting companies that need extra rights. More economical companies are therefore more profitable and there is a financial incentive to start producing sustainably.
There was a fear that this system would cause companies to leave Europe. Because companies in Europe have to pay extra for their emissions, their products are more expensive than those of companies from outside Europe. Due to this unfair competition, companies could choose to establish themselves outside Europe. That is why the industry received part of its rights for free and received subsidies, which partly negated the financial incentive to become more sustainable.
The EU has devised a solution for this: the CBAM (see image below). As soon as polluting companies from outside Europe want to sell their stuff in Europe, they pay for their CO2 emissions at the border.
A few years ago, Milieu Centraal calculated that the Dutch are responsible for three times as much CO2 emissions as the average citizen of the world.
The fossil fuels oil and natural gas are the largest CO2 emitters when burned, especially when they are burned to produce electricity.
As it stands now, the plans will take effect in 2027, the Social Climate Fund a year earlier. It is expected that this will involve small amounts for citizens. According to a spokesman, a refueling session will not be more than 10 euro cents more expensive on average, as is expected. The plans were made for the energy crisis.