The European Union has put the brakes on its own climate ambition. In a major policy overhaul unveiled on Tuesday, the bloc proposed slowing the rate at which businesses must cut their greenhouse gas emissions, giving industries until 2038 to obtain emission allowances instead of the previously planned 2034 – provided they commit to investing in decarbonisation.
The reforms target the EU’s emissions trading system (ETS), its primary tool for curbing carbon since 2005. Under the current system, Europe’s industries and power plants must buy a permit for every tonne of carbon dioxide they emit, creating a financial incentive to shift to cleaner technologies. The number of permits released each year is capped, and that cap has been lowered annually by 4.3%. The European Commission now proposes to slow that rate to 3.7% from 2031 and then to just 1.7% from 2036.
“EU proposes to slow emissions cuts, giving businesses until 2038 for allowances, in a major climate policy overhaul.”
“We are adopting a more business-friendly and, may I say so, savvy approach,” said EU climate commissioner Wopke Hoekstra. The Commission, which develops legislation for the bloc’s 27 member states, said the changes would still keep the ETS on track to meet the EU’s goal of reducing carbon emissions by 90% by 2040, compared with 1990 levels.
The proposal also extends free permits for some sectors until 2038, rather than ending them in 2034 as previously scheduled, when they were to be replaced by a carbon border charge on imports. Under the new plan, 80% of free permits would be given upfront to companies with decarbonisation plans, with the remaining 20% awarded once investments are made.
The ETS has faced fierce criticism from several member states. Italy in particular has condemned it as a de facto tax that keeps energy prices artificially high. Poland, another sceptic, welcomed the softening. “For the first time, we are seeing a softening of the stance rather than a toughening of it – this is a huge success for Poland. Although we will fight for more,” said Polish climate minister Paulina Hennig-Kloska.
Environmental campaigners were less enthusiastic. German Green MEP Michael Bloss said the plans would result in “gigantic climate pollution” and warned that the next generation would have a worse quality of life as a result. The proposals still require approval from EU countries and lawmakers – a process that could take up to a year.