The European Parliament and the European Council has provisionally agreed to strengthen the EU Emissions Trading System (ETS) and to apply emissions trading to a number of new sectors.
The provisional agreement comes under the European Green Deal and has been described by the European Commission as “a fundamental step towards reaching the EU’s commitment to reduce net greenhouse gases (GHGs) by at least 55%” over the next seven years.
As a result of the agreement, emissions from the ETS will be reduced by 62% by 2030, compared to 2005’s levels. This can be compared to a 43% reduction under existing legislation.
The speed of annual emissions reductions will also increase from 2.2% per year to 4.3%per year between 2024 and 2027, and to 4.4% from 2028 onwards.
Under the agreement, EU member states will also spend the entirety of their emissions trading revenue on climate and energy-related projects, to address social aspects of the transition to an emissions free society.
Social Climate Fund
The parties also agreed to establish a Social Climate Fund to ensure the transition to a lower-emissions society is handled fairly.
The fund, which will begin operating in 2026, will be financed by €65 million from the EU budget, combined with 25% co-financing from member states.
It will provide financial supports to member states to help citizens and enterprises and will make investments in energy efficiency measures such as home insulation, heat pumps, solar panels and electric mobility.
The commission has welcomed the provisional agreement, which now requires formal adoption by both the parliament and the council.
Executive vice-president for the European Green Deal, Frans Timmermans said “Emissions trading is the centrepiece of our European Green Deal, putting a price on carbon. A stronger ETS will help us drive investment into decarbonisation and reduce emissions further and faster, in line with our climate targets”.
“With the new Social Climate Fund, the EU will ensure that our green transition is done in a way that protects our most vulnerable and helps them be part of the transition.
“At the end of a challenging year, this is much-needed positive news; in the face of strong headwinds, we continue delivering on the European Green Deal for a sustainable future,” he concluded.
Once this process is completed, the new legislation will be published in the Official Journal of the Union and enter into force.