After being recently voted down in the European Parliament, the reform of the EU’s Emissions Trading System (EU ETS) was successfully passed today. But there’s little cause for celebration: while the changes might appear favourable at first glance, a closer look reveals they are simply a minor facelift to the same set of polluter-friendly policies. 

Seeing double? Photo: Leonid Adronov (Canva)

Today, MEPs gathered once more to vote on the overhaul of the EU ETS as part of the broader ‘Fit for 55’ package of climate policies. This comes two weeks after the unexpected rejection of the compromise deal after it was watered down by amendments lowering ambitions and prolonging handouts to polluters.

While MEPs from across the political spectrum have lauded the new deal as a major win, its actual benefits for the climate over the rejected deal are negligible, according to our analysis, and are substantially weaker than the environment committee (ENVI) proposal that parliament was first offered.

Déjà vu?

In fact, the new deal bears an uncanny resemblance to the rejected deal. For instance, the proposal would see an overall emission reduction in 2030 that is merely 23 megatonnes lower than the rejected deal, equivalent to the annual emissions of just four steel plants

As well as this, copious amounts of free pollution permits will still go to large polluters until 2030, nearly 5 billion compared with the more ambitious target of just over 4 billion agreed by ENVI.

Subsidising pollution in this way removes the economic incentive for heavy industry to take climate action and improve its resource efficiency. It also deprives state treasuries of the auctioning revenues that should be generated and reinvested in further climate action. Auctions under the new deal would raise €336 billion for climate action and innovation, just €10 billion more than the rejected deal and €56 billion less than the ENVI proposal.

Given its similarity to the deal that didn’t make it through the parliament, it appears that the previously sceptical MEPs have been won over by tiny, almost insignificant, changes. Despite the parliament’s commitment to tackling the climate crisis and safeguarding the wellbeing of citizens, the chances of reaching the Paris Agreement targets under this ETS look bleak.

“MEPs may have voted today for what they believe to be politically possible but this deal looks set to land us in the dreadful zone of dealing with temperatures more than 1.5°C above pre-industrial levels.”

Sabine Frank, Executive Director at Carbon Market Watch.

“The need to rapidly steer Europe and its industries away from fossil fuels and towards energy savings and renewable energy is greater now than ever, yet MEPs seem to think the ETS recipes of the past will still lead to success in the future. Unfortunately, they won’t.”

Sam Van den plas, Policy Director at Carbon Market Watch.
Our press briefing earlier this week: Why the European Parliament failed to reform the EU’s carbon market

What happens next?

Although the political prospects for an outcome that can effectively tackle the climate crisis for the good of society have dwindled, there is still one last hope for a more ambitious, more effective EU ETS. The file will now go to EU member states who have the opportunity and responsibility to salvage the reform process. If they rise to the challenge, this will not only be good for the climate but will also generate substantial revenue streams for national climate action. 

“We expected the European Parliament to be more ambitious on key climate policy tools and stand by their commitments to fighting the climate crisis,” said CMW Policy Officer Agnese Ruggiero. “The second take on the ETS vote should have been used more wisely. There is more work to be done and we count on the European Council to steer the dialogue in the right direction.”

Useful links

A compromise too far: Why no deal at the European Parliament was better than a bad deal on EU’s carbon market – Updated

Dramatic week in climate politics shows undercutting ambition is unacceptable

New study: Slashing aviation emissions at little cost to airlines

European Parliament sends carbon market review back to the drawing board

Model answers: Studies reveal EU must revamp Emissions Trading System to live within its carbon budget

How EU member states use carbon market revenues to subsidise fossil fuels

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