Negotiators from Parliament and Council reach shaky deal on EU Emissions Trading System (ETS)

The fiery speeches at COP27 have hardly faded away as EU politicians once again assert themselves as representatives of the interests of the big polluters.
The agreement reached overnight on the ETS clearly fails to strengthen the EU carbon market and boost the EU’s 2030 emission reduction target. Despite slight improvements, the deal struck is still not in line with the 1.5°C goal and the 70% emissions reduction needed, as it settled on an unambitious 62% emission cut for the ETS sectors by 2030. Only by 2034 will free pollution permits to industry be fully phased out. In the meantime, polluters continue to receive billions of allowances without paying for their emissions.

“Parliament position on ETS 2 was clear : no additional taxes on heating and fuels for households. With this deal, Parliament’s negotiators betrayed Parliament mandate. Wages are too low and inflation too high to put additional costs on European citizens”, MEP Leila Chaibi says.

On the Market Stability Reserve (MSR), Parliament’s demands were dropped, with the exception of a stricter review clause. A stronger MSR would have provided a much better safeguard for the functioning of the ETS from a climate perspective.
On a positive note, all member state auctioning revenues must be spent on climate or environmental measures. The current quota is about 72% percent. The increase to 100% will inject tens of billions of euros into environmental measures under the compliance period.
Overall, EU negotiators failed to ensure support for the transition of low-income households towards energy efficiency and 100% renewables.