Europe Reaches Deal to Bolster Carbon Market in Green Deal Push
(Bloomberg) — The European Union reached an agreement to strengthen and expand its flagship carbon market, endorsing the centerpiece of the Green Deal strategy that aims to make its economy climate-neutral by mid-century.
Under a provisional deal backed by representatives of EU member states and the European Parliament on Saturday, emissions trading will be extended to heating and road transport, and will also cover shipping, according to EU officials with knowledge of the talks. The 27-nation bloc will also accelerate the pace at which companies from power producers to steelmakers are obligated to reduce pollution.
The deep reforms are part of the region’s plan to cut emissions by at least 55% from 1990 levels by 2030, and reach net zero by 2050.
While some measures put forward in 2021 were watered down as the EU grapples with an unprecedented energy crisis following Russia’s invasion of Ukraine, the bloc is determined to make the green overhaul the basis of its growth strategy, and set a precedent for other nations and regions in the fight against climate change.
“The deal is a success for the EU and will provide certainty to companies and investors even if some compromises had to be made as the economic environment is very challenging,” said Ingo Ramming, head of carbon markets for Banco Bilbao Vizcaya Argentaria SA in Madrid.
Expectations of stricter rules already helped send carbon prices to a record 99.22 euros per metric ton this year. Benchmark carbon futures traded in Amsterdam closed at 83.82 euros on Friday, more than 10 times the levels seen five years ago.
The deal also complements a landmark measure agreed earlier this week to slap a pollution price on imports of certain goods to Europe, and shield its own producers from cheaper competitors in countries with less strict environmental rules. As part of the emissions market reform, policy makers set the rules for phasing in the Carbon Border Adjustment Mechanism and phasing out pollution allowances that sectors covered by the levy get for free.
“I see the CBAM as a major achievement,” Ramming said. “It could be a catalyst for global carbon pricing. For the implementation, diplomatic skills remain crucial.”
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