EU Lawmaker Proposes Diverting 75% of Carbon Market Revenue to Industry

A draft proposal from the European Parliament's lead negotiator on carbon market reform would require EU governments to channel 75% of the revenue they raise from selling emissions permits into decarbonising local industries covered by the scheme, going beyond the 50% share initially put forward by the European Commission.

The proposal was drafted by Peter Liese, a German lawmaker from the European People's Party, the largest grouping in the European Parliament. Liese said the aim was to give industries some immediate relief and to strengthen support for investment in domestic industry and energy production, adding that the current scheme can be adjusted to give industry more breathing space without undermining climate targets.

The EU is revising its emissions trading system, the bloc's principal instrument for tackling climate change. Under the system, industries and power plants in Europe must buy permits to cover their CO2 emissions, with surplus allowances traded on a carbon market.

The draft also sets out a different trajectory for the emissions cap. It would reduce the cap by 3.4% per year from 2031 and by 2.3% from 2036. The Commission had proposed an annual reduction of 3.7% from 2031 and 1.7% from 2036. The lawmaker's approach would initially slow the pace at which industries must cut emissions, followed by faster reductions in the second half of the 2030s.

That shift responds to pressure from chemicals producers and other industries, which have warned that the cost of complying with the system is hurting their ability to keep European factories running and to compete in global markets.

The European Parliament and EU member countries are each working out their negotiating positions on the reform. Once those are settled, expected in December, the two sides will negotiate the final changes. Lawmakers are due to negotiate the proposed changes in the coming months.