It's all over bar the shouting. The proposed long-term reform of the emissions quota trading system (ETS) of the EU for the period 2021-2013 (fourth phase) was considerably tightened up by the MEPs of the committee on the environment of the European Parliament, in Strasbourg on Thursday 15 December (see EUROPE 11683). However, this reinforcement of the carbon market to further promote investment in green technologies and renewable energies comes with concerns regarding preserving the interests of high-energy consuming European industries whilst protecting them against any unfair advantage of their international competitors.
Thanks to compromise efforts carried out skilfully, the report by Ian Duncan (ECR, UK) was adopted by a wide majority (53 votes in favour, 5 against, 7 abstentions). This is seldom the case with a climate dossier. The compromise amendments were supported by most of the political groups, with the exception of the ENL. Certain Polish MEPs abstained.
"Today, the committee on the environment has given an early Christmas present to everybody who is worried about climate change. We have supported an agreement which responds to our Paris commitments whilst protecting our industries. The commitment of my colleagues who negotiated the dossier has been unstinting and I would like to thank them from the bottom of my heart", said Duncan, who did not call for negotiations to be opened with the Council, giving preference to a vote ahead of time at a plenary session, but also acknowledged that it would be a challenge to have the agreement confirmed by the whole of the Parliament. The vote is scheduled to take place in February. The Environment Council of EU will begin its efforts to reach a general orientation on Monday 19 December.
Giovanni La Via (EPP, Italy) stressed that the parliamentary committee of which he is the chair has sent out a strong message to the Council.
The reform was proposed by the Commission in July (see EUROPE 11360). The adoption since then of the Paris Agreement of December 2015 had a considerable impact on this result, which has been hailed by MEPs, industry and also certain NGOs as a step in the right direction, although some of them regret the emphasis placed on the free allocation of quotas to the energy-consuming industries.
To strengthen the carbon market, the MEPs wish to double the volume of surplus credits that the market stability reserve can absorb every year (up to 24% rather than 12%) for the first four years, starting in 2019. They have also called for the cancellation of 800 million quotas from the market stability reserve with effect from 1 January 2021.
The MEPs wish to raise to 2.4% the linear reduction factor of quotas allocated every year (rather than the 2.2% proposed by the Commission), which would put Europe on track to cut its emissions by at least 80% by 2050.
The amendments voted through will increase the resources of the Innovation Fund. The MEPs also proposed creating a fund to offset maritime transport emissions, improve energy efficiency, facilitate investment in innovative technologies and cut CO2 emissions from the maritime sector. They argue that in the absence of a comparable system operating under the International Maritime Organisation (IMO), CO2 emissions in European ports and sea voyages setting sail from and leaving EU ports should be taken into account.
The MEPs believe that the income from auctioning the quotas in the aviation sector could be used by the member states for measures to fight climate change in the EU and third countries.
With its vote, the parliamentary committee has increased the number of free quotas for the most efficient companies, which will reduce the share of quotas to be auctioned by the same amount (the Commission proposed 57%), but will allow them to avoid losing out due to the inter-sector correction factor.
"We want a balanced reform of the ETS – the necessary ambitions to guarantee the implementation of the Paris Agreement, while at the same time, sufficient protection for those industrial sectors that are exposed to fierce international competition. These guarantees are included in the package adopted", said Ivo Belet (EPP, Belgium), shadow rapporteur for the EPP.
Gerben-Jan Gerbrandy (ALDE, Netherlands), shadow rapporteur for his group, hailed "moderate improvements in the carbon market". However, he went on to say that "with all the exemptions, funds and state aid systems voted in, it is difficult to still call the EU's carbon market a real market. We can and should do more to truly reward investments in innovation and competitive clean technologies".
Jytte Guteland (S&D, Sweden), her group's shadow rapporteur, feels that the text voted through is highly ambitious for the climate and expressed particular satisfaction at the increase in the linear reduction factor and the inclusion of maritime transport. Her colleague Jo Leinen (S&D, Germany) stressed that "high energy-intensity businesses will have more opportunities to acquire free allocations thanks to a broader range of eligibility criteria. However, the committee on the environment excluded free allocation for sectors which trade little with regions outside the EU", he said.
Industry expressed relief, as pragmatism has won the day. For instance, the CEFIC, which represents the European chemicals industry, welcomed the vote, stating that "policymakers have endorsed reasonable levels of free allocation for industry and importantly excluded the complex and unnecessary tiering system" that had been proposed by the Commission. According to the organisation, the chemicals industry will be able to continue to invest in the EU.
NGOs including the WWF and CAN Europe welcome the attempt to reinforce the carbon market and tackle the problem of surplus quotas, but feel that the text is still too timid to allow the EU to bring ETS into line with the requirements of the Paris Agreement. (Original version in French by Aminata Niang)