EU parliament approves “biggest climate protection law of all time”.

On June 18, Switzerland will vote on a law to protect the climate. On Tuesday, the Yes Committee presented its arguments to the media. On the same day, the EU Parliament in Strasbourg approved a whole bundle of laws. This will make Europe “the first climate-neutral continent,” said Roberta Metsola, Speaker of the Maltese Parliament.

There was also no shortage of superlatives. German MP Peter Liese (CDU) spoke of the “greatest climate protection law of all time”. It is a central part of the Green Deal, with which the European Union aims to become climate neutral by 2050. The Federal Council has formulated an identical target for Switzerland.

The EU has set itself an ambitious intermediate target: it wants to reduce its CO2 emissions by 55 percent in 2030 compared to 1990. To this end, the European Commission presented its “Fit for 55” package two years ago. It was criticized by the Greens as lacking, but on Tuesday, like most parliamentary groups, they supported the package of measures.

emissions trading

The most important element is the tightening of the EU emissions trading system (ETS). It is based on the concept that companies buy certificates for the greenhouse gases they emit. With higher emissions, they have to buy more accordingly. If they reduce emissions, they can sell excess certificates. There is a double incentive for CO₂-Decrease.

So much for the nice theory. In practice, the emissions trading introduced in 2005 has hardly worked for a long time. It is true that emissions can be reduced, but in the end the same problem arises as with incentive taxes or a CO₂-Tax: for fear of competitive disadvantages, people shied away from taking effective measures.

Entire areas exposed to a harsh competitive environment (industry, aviation and shipping) were exempted from the ETS or ‘gifted’ with free certificates. Less than half of the EU’s greenhouse gas emissions have so far been recorded by the system. The new law aims to “clean up” these exceptions.

Free pollution rights should be phased out. At the same time, the number of emission allowances is being phased out faster than planned, causing the price to rise. “The era of free pollution is over. Those who produce in a climate-friendly manner save money,” says Michael Bloss, the responsible member of the Greens in the EU parliament.

border adjustment

One problem remains: if CO emissions₂ becomes more expensive, companies and entire production areas are threatening to move to regions with more flexible rules. This is called “carbon leakage” in technical jargon. For this reason, a so-called CO₂– Border adjustment introduced, which should be fully applicable from 2034.

It’s kind of a habit. If you want to import certain goods, you must calculate the difference between the CO₂– Balance price in country of origin and EU certificates. This rule should apply to iron, steel, aluminum and cement, but also to fertilizers, electricity and hydrogen. This is intended to prevent “climate dumping” by third countries.

Swiss companies are not affected because Swiss emissions trading has been linked to that of the EU since 2020. This also applies to Iceland, Liechtenstein and Norway. However, the question of whether the border adjustment is compatible with World Trade Organization (WTO) rules remains open. Complaints to the WTO arbitration court against the EU are foreseeable.

Climate Social Fund

From 2027, emissions trading will be extended to the heating of buildings and transport. This can put a burden on low-income people, which is why a social climate fund of 86.7 billion euros has been created. Three-quarters of this must be financed with revenue from the ETS. Member States pay the rest.

The fund can be used for direct subsidies or for more efficient heating and transport systems. Critics think the amount is too small. Green politician Michael Bloss would have liked a European ‘climate money’, as he noted in a guest article for the ‘Frankfurter Rundschau’, as a per capita dividend from the ETS for citizens.

Nevertheless, Tuesday was “a big day for climate protection” for him. The member states still have to ratify the resolutions, but that is seen as a formality. And on Wednesday it continued in the same style: Products that are directly or indirectly related to the deforestation of rainforests may no longer be sold in the EU.

With material from Keystone-SDA