MEPs again expressed serious reservations about, and even opposition to, the European Commission’s proposal to establish an EU Emissions Trading Scheme (ETS) covering emissions from fuels used for road transport and heating of buildings, during a debate in the European Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI) on Thursday 9 September.
Presented on 14 July as part of the ‘Fit for 55’ climate legislation package, this proposal would lead to the creation of a carbon market adjacent to the current ETS and operating on similar principles (see EUROPE 12762/1).
Fuel suppliers would be responsible for monitoring and reporting the amount of fuel they place on the market. From 2026 onwards, they would then have to buy emission allowances which they could trade according to their needs, with the obligation to surrender sufficient allowances at the end of each calendar year, depending on the carbon intensity of the fuels.
The total quantity of allowances put on the market would be capped and reduced over time, so that the total quantity of emissions would decrease.
Widespread scepticism in Parliament
While the mechanism is therefore not new and has proven its worth in reducing emissions from the power sector and manufacturing industry through the current ETS, the Commission’s proposal is struggling to convince MEPs because the sectors covered are different.
Before a representative of the institution, MEPs reiterated their fears - already expressed on 14 July (see EUROPE 12762/10) - that fuel suppliers would pass on the increased costs of the new carbon market to consumers, leading to higher heating bills and unsustainable petrol prices for the most vulnerable households.
This scepticism seemed to be shared by a large majority, if not all political groups in Parliament, although there were nuances.
“We are critical of the new ETS system on road transport and buildings (…) We think it’s important that you truly evaluate your proposal because this will have social implications if we don’t do this better”, said Jytte Guteland (Sweden), coordinator of the S&D Group.
Emma Wiesner (Renew Europe, Sweden) also questioned whether an ETS was really the best mechanism to reduce emissions from the buildings and road transport sectors.
Saying he was “very sceptical” of the Commission’s proposal, Greens/EFA coordinator Michael Bloss (Germany) said: “As we understand, the price in this second ETS will be only around 30 euros (per tonne of CO2), and that means basically almost zero effect for reducing CO2 emissions in these sectors, but it puts a lot of burden on poor households”.
ECR Group coordinator Alexandr Vondra (Czech Republic) expressed serious concerns about the “social effects” of the new ETS and more broadly the ‘Fit for 55’ package as a whole. He also asked the Commission to carry out a detailed impact assessment of the effects of the ‘Fit for 55’ package for each Member State and for each income group.
The ‘Social Climate Fund’ deemed insufficient
The Commission, for its part, defended its approach. In particular, it recalled that it plans to create a ‘Social Climate Fund’, financed by 25% of the revenues of the new ETS, to compensate for the social impacts of the latter (see EUROPE 12762/6).
However, several MEPs criticised this proposal.
For example, both Mr Bloss and César Luena (S&D, Spain) felt that 25% was not enough.
“How can we ensure that the social climate fund will reach the most vulnerable households?”, asked Petar Vitanov (S&D, Bulgaria).
Phasing out free allowances divides
Another point singled out by a number of MEPs is the phasing out of free allowances in the current ETS.
According to the Commission’s proposal for the reform of the ETS, these allowances will be reduced by 10% per year from 2026 onwards, with a total abolition in 2036.
At the same time as this phase-out, the EU Carbon Border Adjustment Mechanism (CBAM) would be introduced as an alternative tool to combat carbon leakage (see other news).
But some MEPs, such as Mrs Guteland, Mrs Wiesner, Mr Bloss, Petros Kokkalis (The Left, Greece) and Martin Hojsík (Renew Europe, Slovakia), considered this pace to be far too slow, arguing that the abolition of free quotas should be accelerated.
Mr Hojsík also called the non-inclusion of the waste incineration sector in the ETS “outrageous”.
Dutch MEP Bas Eickhout (Greens/EFA) regretted that the Commission had not proposed an immediate abolition of all free allowances for aviation.
While the institution recognises that there is no risk of carbon leakage in this sector, it wants to phase out these allowances, with a view to complete elimination by the end of 2026 (see EUROPE 12764/10). (Original version in French by Damien Genicot)