This article is more than 3 years old

This article is more than 3 years old

An overhaul of the EU’s flagship trading scheme for cutting carbon emissions by European industries has been approved by the member states.

The agreement to reform the emissions trading system comes after almost two years’ of discussions but just two weeks after the European parliament voted in favour of a new directive.

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The acceleration in the EU’s efforts to toughen up the carbon reduction regime illustrates widespread acknowledgement of the need to plug loopholes in current legislation.



The emissions trading system (ETS) is the EU’s key policy for combating climate change by reducing emissions from more than 11,000 installations in the power sector and energy intensive industries. The policy involves a market-based cap and trade system which forces companies to buy allowances to emit carbon.

There have been widespread concerns that emissions were not being sufficiently capped due to an oversupply of “allowances” on the carbon market.

ETS was introduced 12 years ago and initially worked well but prices plummeted after 2008 following the economic downturn.

What is emissions trading? Read more

Under the proposed directive – now due for deliberation by the European parliament – the number of allowances can be gradually reduced, to push up their cost and provide an incentive for industries to adopt cleaner technologies. The cap on emissions will fall by 2.2% a year – the so-called linear reduction factor – until at least 2024.

It is hoped that the new regime will deliver greater cuts in greenhouse gases while providing protection for energy-intensive industries.

The highest performing 10% of factories and other installations will receive all their allowances for free, and a fund of up to €12bn (£10.2bn) will be established to help industry innovate and invest in technology.

Miguel Arias Cañete, the European commissioner for climate action and energy, said: “Less than two weeks after the vote by parliament, today’s agreement demonstrates once more the European Union’s strong commitment to show leadership on climate action and help drive the global transition to clean energy. I count on everybody’s best efforts to swiftly initiate the negotiations between the council and parliament.”

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The revision of the ETS will now be negotiated in trialogue meetings between the parliament, European council and European commission.

Environmental campaigners claim that the reformed ETS does still not do enough. A proposal to remove the rights of big polluters, such as the cement industry, from receiving free carbon credits, was not passed by the European parliament in February, frustrating many.

However, the Conservative party’s energy and climate change spokesman Ian Duncan MEP, who steered the legislation revising the ETS scheme through the European parliament, said the new directive would be a crucial first step. “I am pleased the council has come to a position in good time. It is important we press ahead with this vital piece of climate-change legislation. There are many positive elements in the council position but still much work to do.”