EU prepares plan to toughen carbon market – report
BRUSSELS, June 27 (Reuters) – The European Union plans to toughen its carbon market to cut emissions faster and put a price on pollution in new sectors, Bloomberg News reported on Sunday.
The EU’s Emissions Trading System (ETS) is the bloc’s central climate policy, forcing power plants, factories and airlines operating European flights to purchase permits when they emit CO2 .
The European Commission will propose a system overhaul next month as part of a set of policies designed to achieve a more ambitious climate change target. Read more
Citing a draft of the ETS proposal, Bloomberg said the provision of CO2 permits in the ETS will face a one-time cutoff.
The number of permits entering the ETS each year is also said to be declining at a faster rate, although that rate is not specified, according to the report.
A Commission spokesperson declined to comment on the draft proposal, which could change before its publication.
The proposal would strengthen the ‘market stability reserve’, a mechanism designed to prevent a build-up of excess permits that could lower EU carbon prices.
When the ETS contains more than 1.096 billion available permits, the reserve would absorb 24% per year until 2030, according to the report. When there are between 833 million and 1.096 billion permits in circulation, the reserve would absorb enough permits to bring it down to 833 million.
EU member states and the European Parliament must negotiate final reforms, a process that could take around two years.
Free carbon permits would end for industries covered by the planned EU border carbon tax – a move that could increase carbon costs for steel, cement, aluminum and fertilizer producers . Read more
The report confirmed plans to expand the ETS to include shipping and create a separate new ETS for transportation and heating systems in buildings.
The Commission said it would create a fund to support vulnerable households if the carbon pricing system increases fuel bills. Read more
Reporting by Kate Abnett; Editing by Jan Harvey
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