Climate, what is the ETS reform rejected by the European Parliament

The reform of the ETS system, rejected by the European Parliament, is one of the fundamental elements of the climate package, the so-called Fit for 55, that is the set of laws and regulations with which the EU wants to get on track to cut emissions by 55% by the end of this decade. The Emissions Trading System is a sort of ‘exchange’ of greenhouse gas emissions that the report signed by the German exponent of the EPP, Peter Liese, would have revised, reducing to zero the free quotas. Now he will return to the Environment Committee and a new vote in plenary will not arrive before September. How does it work? The emissions trading system obliges more than 11,000 power plants and factories to apply for a permit for every ton of CO2 they emit. This is a clear incentive to pollute less: the less you pollute, the less you pay. Industries have to buy these shares through auctions and the price follows the rules of supply and demand. Some quotas were given for free, to prevent industries from moving to regions with fewer environmental restrictions in some sectors at risk. Carbon price regulation. Following the 2008 financial crisis, permits were very inexpensive as demand had fallen but supply remained unchanged Having a large surplus and low prices discourages companies from investing in green technologies, thus hampering the efficiency of the system in the fight against climate change. As a solution, a Market Stabilizing Reserve (SRM) was created to better align the supply and demand for allowances by placing excess allowances in a reserve, from which they can be released in the event of a shortage. Reform under the European Green Deal. The EU has been working on an update to align the emissions trading system with the higher emissions reduction targets of the European Green Deal. The Commission proposed to reduce emissions from the sector by 61% by 2030. The proposed changes included a reduced cap for annual emissions in the sector, revised rules for free allowances and the Market Stability Reserve, the extension of the scheme to maritime transport and the creation of a separate emissions trading system for buildings and road transport. What was Parliament asking for? MEPs wanted to revive the ambition of the Commission’s proposal by further decreasing the number of annual allowances available until 2030. They also called for the incineration of municipal waste to be included in the sector from 2026. The free allowances were to disappear by 2030 , when the Carbon Border Adjustment Mechanism would be fully operational. The mechanism would apply a carbon price to goods imported from less ambitious countries and prevent companies from shifting production to a country with less stringent greenhouse gas emission standards. What happened. Before the stop, and the political brawl over a vote that shattered the Ursula majority, the European Parliament had approved the extension of the ETS emissions trading system to maritime transport and municipal waste incinerators and waste-to-energy plants. But even these chapters could now be revised along with the entire reform.