Brussels has warned that proposed changes to carbon-market intervention rules could weaken the EU emissions trading system (ETS) and has criticised broader free allocation exemptions in the European Parliament's draft reform package, but the European Commission has broadly welcomed German centre-right EPP lawmaker Peter Liese's draft report ahead of internal parliamentary negotiations.
The proposed changes to the excessive price fluctuation mechanism under Article 29a of the ETS directive would ultimately weaken the bloc's carbon market, a senior commission official told the European Parliament's environment committee today.
"Trying to engineer a carbon price through frequent market intervention will lead to less cost effectiveness and will reduce market and investment predictability. It will ultimately weaken our well-designed ETS system," said Rosalinde van der Vlies, director for carbon markets and clean mobility at the commission's climate directorate.
Van der Vlies also criticised Liese's proposal to broaden exemptions from conditionality requirements for free ETS allocations granted to installations among the 40pc most efficient facilities in a sector or sub-sector.
"We want to stop being in the business of handing out free lunches," she said, while acknowledging Liese's "very solid report" and his efforts to build a majority in the parliamentary committee.
While Liese's draft proposal "may not be perfect", he said he was open to ideas to improve it.
"But we need to work fast," he said. EU states are eyeing agreements on their position on ETS reform for a meeting of climate and environment ministers on 11 December.
A key priority for Liese is ensuring member states make more effective use of ETS revenues. "Too much of their money has not been used efficiently enough," he said.
On aviation, Liese said including flights to the US and Asia within the ETS could have triggered "serious" reactions from third countries.
"The 5,000km approach improves environmental integrity while being fairer to European hubs and tourist regions. But the devil is still in the details," he said.
On maritime transport, Liese said the commission had proposed a sound approach.
"We are looking at improvements, particularly to protect European ports against evasion," he said.
On waste, Liese noted parliament has repeatedly called for waste incineration to be included in the ETS, but said a 2028 start date would be too early.
"The commission's gradual approach towards 2034 is more pragmatic," he said, adding that member states should use the intervening period to prevent waste being diverted to landfill.
"I don't believe that the commission's proposal, nor Liese's proposal, will fulfil the climate law," Dutch S&D lawmaker Mohammed Chahim said.
Chahim, who is drafting parliament's opinion on reform of the carbon border adjustment mechanism, noted that both member states and parliament had approved the EU Climate Law.
"And then they come with legislation that breaks the climate law," he said.
Chahim argued that under the current proposals, sectors covered by the effort-sharing regulation would have to deliver deeper emissions cuts if the ETS is to achieve its 2040 target.
"That's agriculture, that's transport, that's all non-ETS sectors," he said.
Far-right Patriots lawmaker Mathilde Androuet said Europe's decarbonisation targets remain overly ambitious. "We cannot shift the industrial burden on to agriculture and transport, which are already struggling," she said.
Androuet called for the annual reduction rate of ETS allowances, known as the linear reduction factor, to be cut to 1.7pc for 2031-35 and to 1.3pc from 2036, and from 3.7pc and 1.7pc proposed by the commission, respectively.
The Patriots group also opposes the inclusion of municipal waste incinerators in the ETS and rejects conditions attached to member states' use of ETS auction revenues, particularly minimum spending requirements.
"States must remain free to allocate these resources," Androuet said. She also voiced opposition to extending the ETS to international flights.
Lawmakers have until 6 October to offer amendments to the draft report. The environment committee is expected to vote on its position on 1 December, followed by a plenary vote later in the same month.
