The biggest revamp to date of Europe’s carbon market, one that will make it more costly to pollute and sharpen the 27-member bloc’s main tool for cutting carbon dioxide emissions, has now been approved by EU countries on Tuesday.
The world’s first major carbon trading system has seen a 43% cut in emissions from those sectors after it was luanched in 2005 to force power plants and factories to buy permits when they emit CO2.
Last year, a deal by negotiators and the European Parliament to reform the carbon market to cut emissions by 62% from 2005 levels by 2030 and is designed to deliver the EU’s emissions-cutting targets was approved by EU member countries.
The member states’ approval means the policy can now become a law after nearly two years of EU negotiations. The EU Parliament approved the deal last week.
Of the 27 EU countries, 24 voted for the reform. Poland and Hungary opposed it, while Belgium and Bulgaria abstained.
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Poland said EU climate policies set unrealistic goals after it had previously called for the carbon market to be suspended or its price capped to ease the burden on industry, .
The cost of polluting for sectors such as cement manufacturing, aviation and shipping is expected to be hiked by the reform, that will also raise billions of euros through CO2 permit sales, for national governments to invest in green measures.
Heavy industries will lose the free CO2 permits they currently receive by 2034, while airlines will lose theirs from 2026, exposing them to higher CO2 costs. Emissions from ships will be added to the scheme from 2024.
The EU’s world-first policy to phase in a levy on imports of high-carbon goods from 2026, targeting steel, cement, aluminium, fertilisers, electricity and hydrogen was also approved by EU countries.
The carbon border levy aims to put EU industries and foreign competitors on a level footing, to avoid EU producers relocating to regions with less stringent environmental rules.
The price of EU carbon permits has spiked in recent years, due largely in part to anticipation of the reforms. EU carbon permits were trading at around 88 euros per tonne on Tuesday, having more than tripled in value since the start of 2020.
EU countries also backed plans to launch a new EU carbon market covering emissions from fuels used in cars and buildings in 2027, plus a 86.7 billion euro EU fund to support consumers affected by the costs.
Story was adapted from Reuters.
