MEP now wants ETS opt-out for homes and private cars
Chief MEP calls for temporary derogation for homes and passenger cars under reforms to EU carbon market rules as new rules are expected to raise fuel and energy prices for households .
The EU Emissions Trading System (ETS) limits emissions from the electricity sector, manufacturing industry and airlines operating in Europe. Within this limit, companies can sell and buy emission allowances for each ton of CO2 emitted, thereby establishing a carbon pricing tool that acts as an economic incentive to reduce pollution.
Last summer, the European Commission unveiled a set of proposals to cut greenhouse gas emissions by 55% by 2030, including a reform of the EU carbon market. This included expanding the ETS to cover emissions from shipping and creating a separate cap-and-trade system for road transport and the construction sector.
In a draft report from the European Parliament’s Environment Committee, centre-right German MEP Pieter Liese proposed to start applying the new ETS system to commercial transport and commercial building heating from 2025, one year before the commission’s proposal.
This would mean the rules would not apply to private buildings and private transport until 2027.
The proposal comes as soaring energy prices have increased the burden on low-income households – and have quickly become a source of concern for EU member states due to the geopolitical implications.
However, according to Liese, “carbon pricing is essential to enable the green transition in transport and heating”.
Road transport and buildings have struggled to reduce emissions in recent years, but stricter emissions standards could also lead to emission reductions.
In addition, he also suggested that the Social Climate Fund, intended to support vulnerable households in the energy transition, should start operating from 2025.
25% for the most vulnerable
Europe’s top lawmaker argued that not only should 25% of ETS revenue be used to support the most vulnerable households, but that the remaining revenue going into member states’ coffers should receive “more targeted support if the carbon price increases.
Meanwhile, Liese also proposed that industries committed to decarbonising their manufacturing processes should be better rewarded as part of EU carbon market reform.
According to the committee’s proposal, free allowances are conditional on decarbonisation efforts, but the MEP on this file wants to introduce a new reference system, from 2026, to support innovation and the decarbonisation of intensive industries carbon dioxide, threatened by the so-called “carbon leakage”.
The proposed system would see installations, which perform better than the average top 10% in a specific industry, get “an extra bonus” – in the form of an additional free allowance.
But the worst performing facilities or those without a climate neutrality plan would see their free permits reduced.
“It’s an important tool to make sure everyone understands that ultimately all economic operators have to ensure climate neutrality,” Liese said.
The free permits are designed to help industry players stay competitive against rivals based in non-EU third countries and thus prevent so-called ‘carbon leakage’.
But the commission has planned to phase out free allowances between 2026 and 2035, during the transition period of the new Carbon Border Adjustment Mechanism (CBAM) – initially only applying to iron, steel, cement, fertilizers, aluminum and power generation. sectors.
Nevertheless, the MEP proposed the creation of a temporary reserve of free allowances to help industries in case the CBAM cannot deliver or operate as planned.
NGOs criticized the report for failing to meet Green Deal goals and for preventing a faster phasing out of free allowances.
“Rather than strengthening the EU carbon market, Liese’s recommendations will literally send the EU ETS up in smoke,” said Sam Van den plas of Carbon Market Watch.
The report is expected to be voted on in the European Parliament’s Environment Committee in mid-May, after discussions among EU lawmakers. Then it will be voted on in plenary, before starting negotiations with EU member states.