European Parliament negotiators reach agreement on financing ‘REPowerEU’ through ETS revenues

The EPP, S&D, Renew Europe and Greens/EFA groups in the European Parliament reached a compromise on the European Commission’s proposal to use revenues from the EU Emissions Trading System (ETS) to part-finance the plan aimed at moving the EU away from dependence on Russian fossil fuels by 2027 (‘REPowerEU’), announced Peter Liese (EPP, German), the European Parliament's rapporteur on the dossier, on Tuesday 27 September.

The European Commission had in fact proposed a targeted amendment to the EU regulation establishing the ‘Recovery and Resilience Facility’ (RRF) in order to allocate €20 billion from the auctioning of an estimated 250 million carbon allowances from the Market Stability Reserve (MSR) of the ETS.

This decision was strongly criticised by many MEPs from the S&D and Greens/EFA groups, since the MSR is intended to reduce the surplus of allowances in circulation in order to increase the price of CO₂ and thereby provide an incentive for those sectors covered by the ETS to reduce their emissions. 

“European Commission President Ursula von der Leyen wants to emit an additional 250 million tonnes of CO₂ to finance new energy infrastructure, such as a pipeline to Hungary”, said Michael Bloss (German), the Greens/EFA shadow rapporteur on the dossier, during an interview with some media.

Mr Liese, on the other hand, welcomes the fact that the European Commission’s proposal would lower the price of carbon allowances, as “we need to do everything we can to curb the price of electricity (which is influenced by the ETS) and to provide relief to companies that are on the verge of bankruptcy”.

The four groups therefore agreed to bring forward the auctioning of carbon allowances from the 2026-2030 period to the 2021-2025 period (‘frontloading’), without affecting the MSR.

In addition, MEPs agreed to prioritise cross-border projects, to reject the idea of using the ETS to fund fossil fuel projects, and to cap fossil fuel funding from other sources of revenue mobilised for REPowerEU at €10 billion.

The compromise amendments agreed between the above groups will be put to the vote in the European Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI) – the committee exclusively responsible for this part of REPowerEU – on Monday 3 October, with a view to a plenary vote being held at the end of the month or during the November session.

See the compromise amendments: https://aeur.eu/f/3b4 (Original version in French by Damien Genicot)