CO2 has its price: agreement on the EU’s largest climate protection package Huge wave on the beach in South Africa – 3 dead, 17 injured

Anyone who emits climate-damaging carbon dioxide (CO2) in the EU will have to pay more and more for it in the future. After difficult negotiations, negotiators from the EU parliament and states reached agreement early on Sunday morning on a reform of emissions trading – the core of the EU’s “Fit for 55” climate package. “It is the biggest climate law that has ever existed in Europe,” said MEP Peter Liese (CDU), who led the negotiations for Parliament. Electricity producers, for example, have to pay for their CO2 emissions through emissions trading.

“From a German perspective, the agreement is a breakthrough for climate protection, which at the same time ensures the competitiveness of our European industry and the social cushioning of necessary climate measures,” said Federal Economics Minister Robert Habeck (Greens) about the agreement. The decisions are central to making the EU less dependent on fossil fuels.

The target

To combat climate change, the EU has set itself the target of reducing emissions of climate-damaging greenhouse gases such as CO2 by 55 percent by 2030 compared to 1990. By 2050, the Union wants to be climate neutral, ie only emit CO2 that can also be bound again. In addition, the states want to adhere to the Paris climate agreement, which aims to limit global warming to just 1.5 degrees compared to pre-industrial times. According to the latest data from the statistical authority Eurostat from 2020, the EU has reduced its CO2 emissions by 33 percent compared to 1990 – although the consequences of the corona pandemic were also reflected in that year.

Emissions trading creates an incentive to switch from fossil fuels such as gas or oil to renewable energy and to further reduce CO2 emissions. Until now, electricity producers and industry had to show pollution certificates in order to emit CO2. The number of pollution allowances in circulation must now be reduced more quickly than previously planned. This increases the price of CO2 and makes it more expensive to damage the climate.

Consumers are also being asked to pay

From 2027, the system will be extended to heating buildings and road traffic. Suppliers of gas or petrol, for example, then have to buy pollution certificates, which will probably increase the price of petrol and gas. This should create an incentive to, for example, heat with low-CO2 heat pumps or to drive electrically. However, there is an “emergency brake”: if energy prices are particularly high, the system can be delayed for a year so as not to overburden consumers.

In principle, little will change here for German consumers, since a comparable emissions trading system for buildings and transport has been in force in Germany since 2021. It is unclear how the German system, which is sometimes more ambitious than the EU-wide system, should be integrated into it. EU negotiators had also previously agreed to include aviation and maritime transport in emissions trading.

Fewer pollution rights

The question of how long companies can continue to emit CO2 for free was particularly controversial. Certificates are currently issued free of charge, so that European companies are not disadvantaged compared to producers in third countries where there is no CO2 price. Free certificates for companies are now gradually being phased out by 2034. Companies that do not make an effort for the energy transition must hand in free certificates.

When the free certificates expire, stronger protection mechanisms for European companies should come into effect. Producers abroad also have to pay for CO2 emissions if they want to sell their goods in the EU – via a so-called CO2 border correction, which should come into effect in full from 2034. At the beginning of this week, the negotiators had already agreed in principle on this mechanism.

Higher costs for consumers due to the energy transition – such as rising heating costs – will be absorbed by a new fund of 86.7 billion euros. This is intended to relieve households and finance investments, for example in more efficient buildings or public transport. The fund must be fed with revenues from emissions trading and partly by the member states.

How it goes on

The agreement has yet to be formally ratified by the EU parliament and states – this is usually regarded as a formality. During the negotiations, the federal government was concerned, among other things, about the expiration of the free certificates for the industry, the negotiating participants said. A spokeswoman for the federal government told the German press agency on request that the federal government expressly welcomes the agreement. Some negotiators feared that Germany could block the agreement afterwards. Voting is not allowed before the turn of the year. (sda/dpa)