On 18 April, during the European Parliament's Plenary session, MEPs adopted several crucial files for the EU's 2030 climate ambitions; the EU’s Emissions Trading System, the Carbon Border Adjustment Mechanism and a new Social Climate Fund.
Emissions Trading System (ETS)
The reform of the ETS will oblige ETS sectors to cut their greenhouse gas emissions by 62% by 2030 compared to 2005 levels. It will also phase out free allowances to companies until 20234 as follows:
2026: 2.5%, 2027: 5%, 2028: 10%, 2029: 22.5%, 2030: 48.5%, 2031: 61%, 2032: 73.5%, 2033: 86%, 2034: 100%
The reform of the ETS includes a separate ETS II for fuel for road transport and buildings that will put a price on GHG emissions from these sectors in 2027.
MEPs also voted to include greenhouse gas emissions from the maritime sector in the ETS and agreed to the revision of the ETS for aviation.
Carbon Border Adjustment Mechanism (CBAM)
Parliament adopted the rules for the long-awaited EU Carbon Border Adjustment Mechanism, a tool designed to equalise the price of carbon paid for EU products operating under the ETS and the one for imported goods. The regulation aims to incentivise non-EU Member States to increase their climate ambitions.
CBAM will cover iron, steel, cement, aluminium, fertilisers, electricity, hydrogen as well as indirect emissions under certain conditions. Importers of these goods will have to pay the difference between the carbon price paid in the producing country and the price of carbon allowances in the EU.
The CBAM will be phased out at the same pace as the EU ETS.
Social Climate Fund
MEPs adopted a Regulation to set up a EU Social Climate Fund in 2023 to combat energy poverty in the EU, especially for vulnerable households, micro-enterprises and transport users. It will be funded by auctioning ETS II allowances up to €65 billion, with an additional 25% covered by national resources (amounting to an estimated total of €86,7 billion).
Also on 18 April, the Council and the European Parliament reached an agreement on the Chips Act. The deal will set the framework for the development of an industrial base to double EU’s global market share in semiconductors from 10% to at least 20% by 2030.