Europe’s biggest climate policy heads for final-hour talks

By Kate Abnett

BRUSSELS (Reuters) – European Union negotiators meet on Friday to attempt to strike a deal on an overhaul of the bloc’s carbon market, its main policy tool for fighting climate change, plus a multi-billion-euro fund to shield poorer citizens from CO2 costs.

At stake is the EU’s ability to contribute to global efforts to fight climate change, and achieve its target to cut net greenhouse gas emissions 55% by 2030 from 1990 levels.

Meeting that goal will require the EU carbon market to be reformed to cut emissions faster, which it does by requiring around 10,000 power plants and factories to buy CO2 permits when they pollute.

“It is the biggest environmental and climate law that Europe ever dealt with,” the European Parliament’s lead negotiator Peter Liese said.

Officials from EU countries and the EU assembly, who must both agree the final law, said it was unclear if a deal would be struck, given the large number of unresolved issues.

Negotiators are considering a potential compromise that would cut emissions covered by the carbon market 62% by 2030 from 2005 levels – between the 63% sought by EU parliament and the 61% countries back.

Other issues appear harder to solve. Negotiators are at odds over how quickly to end the free CO2 permits the EU gives industries to protect them from foreign competition.

Those permits will be wound down as the EU phases in a carbon border tariff designed to prevent domestic firms from being undercut by overseas competitors. EU lawmakers want 50% of free permits phased out before 2030, with the rest gone by 2032 – far earlier than the 2036 end-date countries support.

Other issues include a planned new carbon market to impose CO2 costs on suppliers of fuel for cars and heating homes, a divisive policy that some countries and lawmakers fear could cause a public pushback.

Revenue raised by the new market would form a 59 billion-euro ($62.72 billion) fund to compensate consumers facing higher bills as a result, under the original EU proposal.

But EU lawmakers want to exclude private consumers from the new CO2 market, a stance opposed by EU countries, which say they must be included to ensure the bloc’s emissions-cutting target is met, and enough money is raised to fill the new fund.

If approved, the revamped carbon market will form the centrepiece of a package of 12 new EU policies, each designed to cut planet-heating emissions faster. Negotiators have already agreed parts of the carbon market reform, including to expand the scheme to cover shipping and increase CO2 costs for airlines.

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(Reporting by Kate Abnett; editing by Barbara Lewis)