European Parliament backs carbon market reform

• MEPs vote to negotiate with EU member states for an expansion of Europe’s Emissions Trading System.
• The compromise calls for a gradual phase-out of exemptions for the industry over five years to 2032.
• The first vote was narrowly defeated on June 8 when socialists and extremists voted against it.

The European Parliament voted on Wednesday to reform the EU’s carbon market, reversing its surprise rejection of an initial draught of a key component of the bloc’s climate plan two weeks ago.

This time, 439 MEPs voted in favor of a parliamentary position to negotiate with EU member states for an expansion of Europe’s Emissions Trading System (ETS) to include carbon from transportation and construction.

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The compromise also calls for a gradual phase-out of exemptions for the industry over five years to 2032 in exchange for a carbon tax on imports at the EU’s borders from 2027.

The first vote was narrowly defeated on June 8 when socialists and extremists in the parliament cast 339 ballots against it, overwhelming the 249 in favor.

The socialists rebelled against what they said was an egregious watering-down of the text by the conservative European People’s Party (EPP), the parliament’s biggest group of lawmakers.

The EPP had sought to dilute the proposals, notably by allowing sales of hybrid vehicles to continue, prompting the left to say the original text lacked the ambition needed to tackle climate change through carbon trading.

That upset forced the text to go back through cross-party parliamentary committees to find a compromise.

While the EPP ceded some ground, it also won the right for EU industry to continue to get ETS exemptions for production exported to countries that don’t have a comparable carbon border import tax, to ensure business competitiveness.

Non-governmental organizations were critical of Wednesday’s result.

British charity Oxfam called it “a step up but still unfair to poorer countries” because of the hit they will take once the EU border carbon import tariff is imposed.

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The environmentalist group WWF said the revised stance adopted by the European Parliament was “no more than old wine in new bottles” because in its view the measures around the ETS were too “feeble”.

The EU’s executive, the European Commission, and its chief Ursula von der Leyen, have made a reform of the bloc’s carbon market a policy priority.

Last year, the commission announced plans to ban the sale of vehicles powered by internal combustion engines, which were supported by MEPs in the first vote.

Its goal is to reduce greenhouse gas emissions by 55% by 2030 compared to 1990 baseline levels.