Maritime transport, heating and cars targeted by the overhaul of the European carbon market
BRUSSELS, June 30 (Reuters) – The European Union wants to reform its carbon market to reduce global warming emissions more quickly and put a price on pollution from maritime transport, road and heating systems in buildings , according to a draft document seen by Reuters on Wednesday. .
The bloc’s executive European Commission will propose next month the biggest overhaul of its emissions trading system (ETS) since the policy was launched in 2005. The ETS is forcing power plants, factories and companies airlines providing European flights to purchase CO2 permits, creating a financial incentive to pollute less.
The reforms are part of a package of European policies that Brussels will propose on July 14 as it strives to meet the EU’s target of reducing net emissions by 55% by 2030, compared to 1990 levels. Most EU policies are designed to conform to an old climate target and need to be updated. Read more
A draft of the ETS proposal, first reported by Bloomberg News, said the supply of CO2 permits in the ETS will face a one-time reduction.
The number of permits entering the EU carbon market each year will also decline at a faster rate, starting the year after reforms are implemented, the draft says, without specifying how quickly the cap will fall.
The proposal would strengthen the ‘market stability reserve’, a mechanism designed to prevent a build-up of excess permits that could lower EU carbon prices.
The price of CO2 permits in the EU ETS has reached record levels this year and is currently trading at around 56 euros per tonne.
When the ETS had more than 1.096 billion available permits, the reserve would absorb 24% per year until 2030. When there were between 833 million and 1.096 billion permits in circulation, the reserve would absorb enough permits to bring it back. to 833 million.
The Commission declined to comment on the proposal, which could change before its publication. Member states and the European Parliament must negotiate final reforms, a process that could take around two years.
END OF FREE PERMITS
Free carbon permits will end for industries covered by the EU’s planned carbon border tax, according to the draft, a proposal manufacturing sectors should resist. Read more
The EU’s climate policy package will include a tariff to force importers to pay for CO2 emissions contained in goods such as steel and cement. Charges from importers per tonne of CO2 would be linked to the EU’s carbon price in an attempt to put European companies on an equal footing with foreign companies. Read more
Other industries would also get fewer free permits, as part of proposals to strengthen the benchmarks that calculate each sector’s free permits, while companies must prove they are investing in CO2 reduction to receive them. .
The EU carbon market will expand to include maritime transport, which until now was not covered. Emissions from maritime travel within Europe and inbound travel to the EU would both be covered, according to the project.
It would also create a separate ETS for transport and heating systems in buildings. These sectors would face CO2 costs from 2026.
The Commission said it would use the revenues from the new emissions trading system to create a fund to support vulnerable households, if their fuel bills go up as a result of the carbon pricing system. Read more
Reporting by Kate Abnett; edited by Gabriela Baczynska and Barbara Lewis
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