EU climate agreement: citizens will also pay for emissions

The European Parliament and EU member states took an important step towards a more ambitious climate policy on Saturday evening. After more than thirty hours of almost continuous negotiations, they reached an agreement adjustments to the emissions trading system (ETS). The deal should ensure that greenhouse gas emissions fall faster, so that 2030 climate targets are met, and possibly even strengthened, despite challenging economic circumstances. The new plans cover big industry as well as individuals and small businesses.

Peter Liese, chief negotiator on behalf of the European Parliament, called 2027 a crucial moment in an initial reaction. “By then everyone should be working to reduce emissions.” If not, “a lot will have to be paid.” Liese said he hopes the new deals will provide an impetus for further investment in green energy.

What is new in the agreement is that fuel use and energy consumption in the built environment will also work with an emissions trading scheme, which has existed for much longer for the energy sector and heavy industry, such as the steel, chemicals and cement. This means that private individuals (and small businesses) will also pay for the emissions they cause with their car, home or business premises. This new form of carbon tax will be introduced in 2027, one year later than proposed by the European Commission. If energy prices are still as extremely high as they are now at that point, the decision will be deferred for a one-off period of one year.

A very delicate subject

This has been a very sensitive issue for both the Parliament and the Member States, because it directly affects people’s wallets. Arrangements have therefore been made to prevent costs from rising too much. If the CO₂If the price exceeds €45 per tonne, up to 20 million more allowances can be placed on the market to artificially lower the price.

There will also be a social climate fund to protect vulnerable citizens. This fund is paid from the proceeds of the new levy and amounts to more than 85 billion euros. This money is intended for people who get into trouble because of the new tax and can be used, among other things, to insulate homes and business premises or to switch to electric transport.

Chief negotiator Peter Liese hopes the new deals will provide an impetus for further investment in green energy

“We want to ensure that these costs never add up to consumers’ high energy bills,” said MEP Mohammed Chahim (PvdA), involved in the negotiations. “That is why it is vitally important for us to set a maximum price for this CO₂ and have an emergency mechanism that can shut down the system if the price of gas or oil gets too high.”

His colleague Bas Eickhout (GroenLinks) also attaches great value to the climate fund because, according to him, climate goals can only be achieved if the most vulnerable in society can also participate. He believes the fund deals don’t go far enough. “This social climate fund is unfortunately too cautious a first step,” says Eickhout. “In terms of scale, this is still insufficient. Here EU countries really have to work to support people in transport or energy poverty.”

End of free shares

Read this too frontier levy opinion piece

In addition to the new ETS, existing emissions trading will also be addressed. After 2026, the distribution of free emission allowances to large companies will gradually cease. From 2034 they will have to pay for every ton of CO₂ which they then emit. The free emission allowances were intended not to jeopardize the competitive position of European companies. But that fear has diminished the introduction of an import tax on polluting products from non-EU countries, on which an agreement had already been reached in Brussels last week. The introduction of the import tax, which has met with great resistance in China and the US, among others, will go hand in hand with the phasing out of free emission allowances in the EU itself.

In terms of scale, this is still insufficient, here EU countries really have to work to support people in transport or energy poverty

Bas Eichout Green Links MEP

“It was important for us Social Democrats that industry in particular met stricter requirements,” said Chahim. “It could have been a little more ambitious as far as we’re concerned.” According to Eickhout, member states have long resisted phasing out free allowances. It’s happy that it’s happening now, but it’s moving too slowly, in the early years by a few percentage points a year. “Unfortunately, we’ve been stuck with these untargeted subsidies for more than a decade.”

Expansion of the Innovation Fund

The existing agreement was also agreed in the agreement greening innovation fund to expand the industry. The fund is paid with the proceeds from the sale of emission rights. Until now, the money of 450 million allowances was available for this, which will be increased to 575 million allowances – an emission allowance (for the emission of 1 ton of CO₂) costs around 84 euros, which is about ten times the price five years ago. Also for the fund for modernizationwhich should help poor Member States in the energy transition, additional funds will be made available.

Carbon Market Watch, a non-governmental organization with extensive experience in the emissions market, he reacted disappointed on the result of the negotiation. According to Carbon Market Watch, policymakers have bowed to pressure from industry amid mistaken fears that harsh climate policies will lead to deindustrialization in Europe. “The European carbon market will fail to reduce emissions sufficiently and therefore will not make the polluter pay,” said spokesman Sam Van den Plas.

Chief negotiator Peter Liese, a German Christian Democrat, disagrees. “This deal makes a huge contribution to the fight against climate change at low cost,” he says. ‘It will give citizens and industry breathing room in difficult times and send a clear signal to European industry that green technologies are worth investing in.’