EU gives green light to revamp of Europe’s main climate policy

On Tuesday, EU countries approved the greatest overhaul of Europe’s carbon market, making polluting more expensive and sharpening the 27-member bloc’s key instrument for lowering carbon dioxide emissions.

Since 2005, the world’s first large carbon trading scheme has required power stations and factories to acquire CO2 permits, reducing emissions by 43%.

Last year, EU negotiators and Parliament reached a deal to restructure the carbon market to cut emissions by 62% from 2005 levels by 2030, meeting the EU’s emissions targets.

After nearly two years of EU talks, the member states’ approval makes the policy legal. EU Parliament approved the arrangement last week.

24 of 27 EU countries supported the measure. Belgium and Bulgaria abstained, Poland and Hungary opposed.

Poland, which has advocated for the carbon market to be suspended or capped to reduce industrial burdens, said EU climate policies set unachievable expectations.

The change will raise billions of euros through CO2 permit sales to fund green initiatives in cement, aviation, and shipping.

Heavy industries will lose their free CO2 licenses by 2034, and airplanes by 2026, exposing them to greater CO2 expenses. Ship emissions will be included in 2024.

Countries also agreed the EU’s world-first tariff on high-carbon imports from 2026, targeting steel, cement, aluminium, fertilisers, power, and hydrogen.

To prevent EU producers from moving to countries with weaker environmental regulations, the carbon border charge levels the playing field between EU and international companies.

The measures have driven up EU carbon permit prices. On Tuesday, EU carbon licenses were worth 88 euros per tonne, having quadrupled since 2020.

EU countries also supported a 2027 carbon market for automotive and building fuel emissions and an 86.7 billion euro EU fund to help consumers.