EU Parliament rejects proposed carbon market reforms

The European Parliament has rejected a series of proposed reforms to the EU Emissions Trading System in a vote in Strasbourg June 8, in a move that looks set to delay the legislative process for the EU's Fit-for-55 package.

The parliament voted against a raft of reforms that seek to re-align the carbon market with the bloc's revamped 2030 goal to cut economy-wide greenhouse gas emissions by 55% below 1990 levels.

"A majority of the far-right, Greens and Social Democrats narrowly rejected the Environment Committee's proposal on emissions trading and referred the issue back to committee," the parliament's lead lawmaker on carbon market reforms, Peter Liese, said in a statement June 8.

Several political groups in the parliament felt the proposed reforms did not go far enough, even though the measures would have led to additional emissions cuts, Liese said.

The committee's proposal had tightened up the European Commission's original July 2021 proposal in many places and would have delivered a 63% emissions reduction by 2030 among sectors covered by the EU ETS, instead of the EC's proposed 61% cut, he said.

The package would also have included waste incineration in the EU ETS and expanded it to cover CO2 emissions from shipping much earlier than first envisaged by the EC.

"For the Greens and Social Democrats this simply did not go far enough. They wanted a 67% reduction and a higher one-off reduction [to the overall CO2 cap] at the very time when we are challenged by the crisis in Russia and the need to become less dependent on Russian gas," Liese said.

"Personally, I believe that the Council of Ministers will find sensible compromises on all the contentious points, but it is a pity for the Parliament," he said.

Carbon prices initially picked up June 8 as the voting process began but eased lower once it become clear the parliament had not found agreement on the file.

EU Allowance futures contracts for December 2022 delivery rose briefly to Eur81.98/mtCO2e ($87.91/mt) just after midday but fell back to Eur79.48/mtCO2e by early afternoon.

EUA prices increased by 139% in 2021, according to Platts assessments published by S&P Global Commodity Insights. The gains were linked to higher demand due to an economic recovery and greater use of coal for power generation across Europe in 2021, as well as on expectations of tighter supply in future due to the planned market reforms.