On Tuesday, Parliament approved the deals reached with EU countries in late 2022 on several key pieces of legislation that are part of the “Fit for 55 in 2030 package”. This is the EU’s plan to reduce greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels in line with the European Climate Law.
Emissions Trading System reform
The reform of the Emissions Trading System (ETS) was adopted with 413 votes in favour to 167 against and 57 abstentions. It increases the ambition of the ETS, as GHG emissions in the ETS sectors must be cut by 62% by 2030 compared to 2005-levels. It also phases out free allowances to companies from 2026 until 2034 and creates a separate new ETS II for fuel for road transport and buildings that will put a price on GHG emissions from these sectors in 2027 (or 2028 if energy prices are exceptionally high).
For more details on the ETS reform, see the press release after the deal with EU countries.
Parliament also voted to include, for the first time, GHG emissions from the maritime sector in the ETS (500 votes to 131 and 11 abstentions) and agreed to the revision of the ETS for aviation (463 votes to 117 and 64 abstentions). This will phase out the free allowances to the aviation sector by 2026 and promote the use of sustainable aviation fuels.
New carbon leakage instrument created
With 487 votes to 81 and 75 abstentions, Parliament adopted the rules for the new EU Carbon Border Adjustment Mechanism (CBAM), which aims to incentivise non-EU countries to increase their climate ambition and to ensure that EU and global climate efforts are not undermined by production being relocated from the EU to countries with less ambitious policies.
The goods covered by CBAM are iron, steel, cement, aluminium, fertilisers, electricity, hydrogen as well as indirect emissions under certain conditions. Importers of these goods would have to pay any price difference between the carbon price paid in the country of production and the price of carbon allowances in the EU ETS.
The CBAM will