During the plenary session of 17 to 20 April in Strasbourg (see other news), the European Parliament is expected on Tuesday 18 April to ratify the political agreements reached with the Council of the European Union on several major texts of the ‘Fit for 55’ package to fight climate change, namely the Carbon Border Adjustment Mechanism (CBAM) and the revision of the ‘ETS’ system of greenhouse gas emission allowance trading.
CBAM. The principle is to apply a carbon price to imported products, in the same way as the Emissions Trading System (ETS) does within the EU (see EUROPE 12762/5). Initially, the CBAM will only apply to a limited list of products, according to the regulation to be adopted by MEPs.
This is “a very important achievement”, said French MEP François-Xavier Bellamy (EPP), who nevertheless called for work on the next steps, notably the extension of the CBAM to other product categories. “We must not rely on the trilogue agreement, we must complete it”, he insisted at a press briefing on 14 April.
His colleague Pascal Canfin (Renew Europe, French) reminded the audience at the same press conference that this is a planned move: one year before the full entry into force of the CBAM (2026), the European Commission will have to present a report on the possible inclusion of processed products and a methodology to do so. This report should be accompanied, if appropriate, by a legislative proposal, also before 2026.
“It was difficult for the time being to go beyond raw materials, for technical reasons. We are the first to implement this system. However, we must immediately send a signal that it will not stop there and that it will cover, in the future, cars produced in Tangiers, for example, which use Turkish aluminium”, indicated Pascal Canfin.
For the time being, the various political groups seem prepared to vote for the text that resulted from the provisional agreement in December (see EUROPE 13083/23).
See the text of the CBAM provisional agreement: https://aeur.eu/f/6bw
Review of ETS. The text on the revision of the ETS to align it with the objective of a 55% reduction in the EU’s net greenhouse gas (GHG) emissions by 2030, compared to 1990 levels, will also be put to the vote in the European Parliament on Tuesday 18 April.
The provisional political agreement reached on 18 December 2022 (see EUROPE 13087/4) following inter-institutional negotiations on the revision of the EU Emissions Trading System aims to reduce GHG emissions in the sectors covered by the ETS by 62% by 2030 and introduces a bonus-malus system to incentivise best performers and innovation.
It also provides for a separate second ETS for buildings and road transport. In line with the Parliament’s position, the application of ETS2 is extended to all fuels - regardless of their end use - compared to the European Commission’s original proposal and will start in 2027, one year later than in the Commission’s original text.
Furthermore, the thorny issue of phasing out free allowances in the ETS, which was linked to the entry into force of the CBAM, has been resolved and should no longer jeopardise the vote on the CBAM or the ETS review. As a compromise, the European Parliament and EU Council negotiators chose the date of 2034 as the date by which no more free emission allowances would be distributed to European companies operating in the sectors covered by CBAM.
See the text of the ETS provisional agreement: https://aeur.eu/f/6by
Maritime transport. In order to extend the ETS to maritime transport, the dossier was split into two. Discussions will therefore have to focus specifically on this aspect, for which a provisional agreement was approved on 29 November (see EUROPE 13074/10). The text obliges shipping companies to surrender emission allowances from 2025. For the first time, revenues from the sale of allowances will support the financing of decarbonisation projects in the maritime sector. 20 million allowances, or €2 billion, will be made available under the Innovation Fund.
Aviation ETS. The European Parliament is also expected to adopt the revision of the EU Aviation Emissions Trading System (see EUROPE 13079/6) applying the ETS to flights within the European Economic Area, including flights to and from the UK and Switzerland, while the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will apply to extra-EU flights. In particular, the text provides for a gradual reduction in the number of free emission allowances granted to the aviation sector (-25% in 2024 and -50% in 2025), with a view to phasing them out completely by 2026, one year earlier than proposed by the Commission, reaching full auctioning in 2026.
Social Climate Fund. To help Member States manage the socio-economic impacts of the entry into force of ETS2 in 2027, a Social Climate Fund should be set up. It will start in 2026, financed by ETS1, and from 2027 by ETS2 (see EUROPE 13087/17).
The Fund for 6 years will be €65 billion, with 25% national co-financing. But the size of the Fund will be reduced to €54.6 billion in the event of a postponement of ETS2 to 2028, as provided for by the emergency brake option. This last point had again occupied the co-legislators earlier this year, despite the political agreement of 18 December (see EUROPE 13101/17). (Original version in French by Léa Marchal, Solenn Paulic and Nithya Paquiry)