19/04/23

EUROPE: Parliament approves core EU climate legislation.

As published on politico.eu, Tuesday 18 April, 2023.

The European Parliament on Tuesday gave its final blessing to key pieces of legislation that form the backbone of the EU's flagship climate policy package — putting them one step closer to becoming law.

Two years of fraught negotiations between the Parliament, the Council of the EU and the European Commission culminated last year in a compromise deal on plans to revise the bloc's carbon market, set up a carbon tax, and create a Social Climate Fund to compensate vulnerable consumers.

The files are a key part of the EU’s so-called Fit for 55 package, which was designed to help the bloc cut greenhouse-gas emissions 55 percent by 2030 against a 1990 baseline.

The revision of the EU's carbon market, known as the Emissions Trading System, includes fully integrating aviation into the mechanism and extending it to cover shipping emissions. It also compels power generators and heavy polluters to curb their pollution by 62 percent by 2030.

The deal also establishes a parallel carbon market to cover fossil fuels used to power cars and heat buildings from 2027 — a hugely contentious issue amid fears that the policy will have a disproportionate effect on vulnerable households, potentially sparking political backlash.

To avoid such a scenario, legislators also backed a €86.7 billion Social Climate Fund to help governments soften the blow of higher prices for vulnerable consumers. The fund will be made available from 2026.

The deal also puts the EU on track to establish the world's first carbon border tax, known as the Carbon Border Adjustment Mechanism, in a bid to avoid EU companies being undercut by regimes with less stringent green policies.

Now that the files have been approved by the Parliament, the deal needs to be formally ratified by the Council before it can come into force.