Building on our series of CBAM articles, we report shocking news from the EU Parliament. Members of the EU Parliament (“MEPs”) unexpectedly rejected a series of legislative proposals from the “Fit for 55” legislative package, including the EU Parliament’s negotiating position on the introduction of a Carbon Border Adjustment Mechanism (“CBAM”).
Back in 2005, the EU established the EU Emissions Trading System (“ETS”) which has since become a cornerstone of the EU’s climate change policy and its most important tool for reducing greenhouse gas emissions. Since its inception, the ETS is constantly being reformed which was one of the goals at this plenary session as well, only this time, things did not go as planned. In the absence of support from the majority of MEPs, the revision of the EU ETS is currently stalled. The ETS Report, which was voted down, will now be sent back to the Committee on the Environment, Public Health and Food Safety (“ENVI”) for further consideration.
Due to the great interrelation, the rejection of the ETS Report set off a chain reaction, bringing down two other key votes: one on the Social Climate Fund, which would be partially financed by revenues obtained from ETS, and another on the CBAM which would put a levy on imported goods from countries where carbon prices are lower than those in the EU or non-existent. As a result, the CBAM Report will also go back to referral to the ENVI in order to be renegotiated.
The ENVI will meet with the coordinators of political groups next week to discuss the ETS and CBAM in order to find a path forward on the files, with the aim of quickly adopting Parliament’s position on the texts and initiating inter-institutional negotiations between the Parliament, the Council, and the Commission in a process known as trialogue. Although it is speculated that the process will continue after the summer, it remains to be seen how long it can be, but we promise to keep you up to date on any developments.
