Whoever emits climate-damaging carbon dioxide (CO2) in the EU will have to pay for it more often and more in the future. After difficult negotiations, negotiators from the EU Parliament and the states agreed early in the morning on a reform of emissions trading – the heart of the EU climate package “Fit for 55”.
“It is the biggest climate law that has ever existed in Europe,” said MEP Peter Liese (CDU), who led the negotiations for Parliament. Emissions trading means that electricity producers, for example, have to pay for their CO2 emissions.
“From a German perspective, the agreement is a breakthrough for climate protection, which at the same time ensures the competitiveness of our European industry and the social cushioning of necessary climate measures,” commented Federal Minister of Economics Robert Habeck (Greens) on the agreement. The resolutions are central to making the EU less dependent on fossil fuels.
The goal
To combat climate change, the EU has set itself the goal of reducing emissions of climate-damaging greenhouse gases such as CO2 by 55 percent by 2030 compared to 1990. The Union wants to become climate-neutral by 2050 – i.e. only emit CO2 that can be bound again . In doing so, the states want to adhere to the Paris climate protection agreement, the aim of which is to limit global warming to as little as 1.5 degrees compared to pre-industrial times. According to the latest data from the statistics authority Eurostat from 2020, the EU has reduced its CO2 emissions by 33 percent compared to 1990 – although the consequences of the corona pandemic were also reflected in that year.
Paying for greenhouse gas emissions
Emissions trading creates an incentive to switch from fossil fuels such as gas or oil to renewable energy and to further reduce CO2 emissions. So far, electricity producers and industry have had to show pollution certificates in order to emit CO2. The number of pollution rights in circulation is now to be reduced faster than previously planned. This increases the price of CO2 and it becomes more expensive to damage the climate.
Consumers are also asked to pay
The system is to be extended to heating buildings and road traffic from 2027. Suppliers of gas or petrol, for example, then have to buy pollution certificates, which is likely to increase the price of petrol and gas. This should create an incentive, for example, to heat with low-CO2 heat pumps or to drive electric cars. However, there is an “emergency brake”: If energy prices are particularly high, the system can be postponed by a year so as not to burden consumers too much.
In principle, little is likely to change for German consumers here, since a similar emissions trading system for buildings and transport has been in force in Germany since 2021. It is unclear how the German system, which is sometimes more ambitious than the EU-wide system, is to be integrated into it. The EU negotiators had also previously agreed to include aviation and maritime transport in emissions trading.
Fewer pollution rights
The question of how long companies can continue to emit CO2 free of charge was particularly controversial. Certificates are currently being issued free of charge so that European companies are not at a disadvantage compared to producers in third countries where there is no CO2 price. Free certificates for companies are now to be gradually phased out by 2034. Companies that don’t make an effort in the energy transition have to hand in free certificates.
CO2 tariff
When the free certificates expire, stronger protection mechanisms for European companies should take effect. Producers abroad should also pay for CO2 emissions if they want to sell their goods in the EU – through a so-called CO2 border adjustment, which should apply in full from 2034. Negotiators had already agreed in principle on this mechanism at the beginning of the week.
Climate Social Fund
Higher costs for consumers due to the energy transition – such as rising heating costs – are to be absorbed by a new fund of 86.7 billion euros. This is intended to relieve households and finance investments, for example in more efficient buildings or public transport. The fund is to be fed by revenues from emissions trading and partly by the member states.
How it goes on
The agreement still has to be officially confirmed by the EU Parliament and the states – this is usually considered a formality. During the negotiations, the federal government had concerns, among other things, about the expiry of the free certificates for industry, according to participants in the negotiations. A spokeswoman for the federal government told the German Press Agency on request that the federal government expressly welcomes the agreement. Some negotiators had concerns that Germany could block the agreement afterwards. A vote should not take place before the turn of the year.
