Thursday, June 1, 2023

The European Parliament approves eliminating free emission rights and imposing tariffs on steel imports

The plenary of European Parliament approved this Tuesday the political agreements reached with the Twenty-seven in December within the European Union plan to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels and which include the elimination of free emission rights to companies, the incorporation of taxes on fuels for road transport and heating, and the imposition of tariffs on imports of products such as steel.

Specifically, the MEPs have adopted, by 413 votes in favour, 167 against and 57 abstentions, the reform of the Emissions Trading System, which calls for a 62% reduction in greenhouse gas emissions by 2030 compared to 2005 levels for sectors included in the emissions trading scheme.

The revision also phases out free allowances for companies from 2026 to 2034 and creates a separate new regime for the fuel for road transport and buildings that will put a price on greenhouse gas emissions from these sectors in 2027 (or 2028 if energy prices are exceptionally high).

The plenary session of Parliament has also approved the inclusion, for the first time, of GHG emissions from the maritime sector in the emissions trading regime (500 votes against, 131 and 11 abstentions) and has agreed to review the regime for aviation (463 votes against). 117 and 64 abstentions), which implies the phasing out of free allocations to the aviation sector by 2026 and will promote the use of sustainable aviation fuels.

carbon border tuning
With 487 votes in favor, 81 against and 75 abstentions, MEPs have adopted the rules for the new EU Carbon Border Adjustment Mechanism, which will tax imports of products such as steel, with the aim of encouraging countries outside the EU to increase their climate ambition.

The goods covered by this regulation are iron, steel, cement, aluminum, fertilizers, electricity or hydrogen, as well as indirect emissions under certain conditions, so that importers of these goods will have to pay any difference between the price of carbon in the country of production and the price of carbon allowances in the EU.

The new mechanism will be phased in from 2026 to 2034, at the same rate as free allowances will be phased out.

Social Fund for the Climate
The third of the agreements with the Member States to establish an EU Social Climate Fund in 2026 and guarantee that the climate transition is just and socially inclusive has been adopted by 521 votes in favor, 75 against and 43 abstentions.

The texts must also be formally approved by the Council and will then be published in the Official Journal of the EU to enter into force 20 days later.


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