European Parliament Shuts Down Climate Bill Amidst Chaos
Greens and Socialists rejected ETS Reform Bill after it was watered down by the Right.
On June 8th, the European Parliament rejected a climate bill, which sought to reform the EU’s Emission Trading System (ETS), due to last-minute disagreements between political groups. The new bill aimed to limit the emissions produced by road transport and buildings.
Established in 2005, the EU’s Emission Trading System is an international scheme designed to reduce greenhouse gas (GHG) emissions based on a cap and trade policy. Under this system, governments determine a limit or cap on the total amount of greenhouse gases that different entities can emit each year. Afterwards, these entities receive a number of GHG emission allowances — also known as carbon credits, representative of that limit. The entities can then trade these credits among each other freely, provided that, at the end of the year, they have a number of credits equivalent to their emissions.
This means that, a company which pollutes less than their limit can either save the extra carbon credits for next year or sell them to other businesses. While companies which pollute more than they should need to buy carbon credits from other businesses or otherwise pay a fine. Thus, the ETS effectively puts a price tag on GHG emissions, while giving markets the flexibility to adapt to climate targets. Furthermore, the limits imposed are reduced over time in order to decrease GHG emissions.
Since the launch of the ETS — the first international carbon market, there has been a reduction of 42.8% of GHG emission in the targeted sectors (i.e., electricity and heat generation, commercial aviation, oil refineries, steel production and the chemical industry), as well as the adoption of similar systems worldwide.
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Last year, the European Commission presented a set of proposals to reform the current Emission Trading System. These proposals were part of the Fit for Fifty-five climate legislative package, which aimed to reduce the GHG by 55% before the end of 2030. Among them was the creation of a parallel system — known as ETS II, that would cover the transport sector and buildings, which were not previously covered.
This new proposal was particularly controversial and contested by climate groups, including Greenpeace and the World Wide Fund for Nature (WWF). They argued that the extra costs of emissions would be transferred to consumers and impact middle-class and poor households the most. This warning echoed the sentiments initially expressed by the Yellow Vests protests which took place across France between 2018 and 2020. To address this issue, the Environment Committee, responsible for drafting the initial report on the ETS reform bill, decided to exempt private buildings and private transport until 2029.
At the beginning of the year, the draft bill appeared to generate a consensus within the Committee, composed by members of all political groups. However, when it came time to vote on Wednesday, the center-right European People’s Party (EPP) — which holds the parliament’s majority — began shutting down several amendments put forward by the center-left Socialists and Democrats (S&D) Party while passing amendments which protected the industry.
What prompted the most outrage, though, was when the EPP pushed back the date to phase out free carbon credits given to the best performing entities. The deadline was delayed until 2034 as opposed to 2032, the date that had been agreed with the Socialists and the Liberals (Renew Europe Group). The later date had been lobbied by the steel and cement industries, according to Politico, and was in alignment with the far-right groups — which are generally against climate laws.
Following what was seen as a betrayal, and ahead of the final vote on the full ETS reform bill, Socialist Leader Iratxe García asked for a three-minute break to gather with her colleagues as tensions rose within the room. Once back to the plenary, the vote was held, and the EU Parliament’s president Roberta Metsola announced its results.
The proposal to reform the Emission Trading System was rejected with 340 votes against and 265 in favor. The announcement was followed by boos and cheers as heated accusations were traded between Members of Parliament.
As a response to what they saw as an impromptu watering down of the initial proposal, which went against months of cross-party compromises, a coalition of Socialists, the Left (GUE/NGL) and the Greens blocked the reform bill, aligning themselves with the far-right vote. Meanwhile the EPP and the Liberals, which voted in favor, accused the opposition of being unable to compromise. MEP Peter Liese of the EPP — a central piece to the negotiations — went as far as stating “I think it’s a shame that the far-right and the Socialist and the Greens have voted together”.
The rejection of the ETS reform bill caused a domino effect which resulted in the failure of two other interlinked climate bills: one proposing the establishment of a Social Climate Fund and the other a Carbon Border Adjustment Mechanism, a tax on polluting imports. Fortunately, the parliament agreed to send the three bills back to the Environmental Committee for a second try at a compromise, which should be back to the hemicycle (parliament) for voting later this year.
Despite the massive blow to the Fit for Fifty package, some climate bills did manage to be approved amidst the fallout, including a ban on the sale of new fossil-fuel cars in 2035.