Draft shows that the EU's largest political group wants to reduce carbon market burden for industry

According to a draft of a position paper, the European Parliament's largest political group wants to reduce pressure on companies from the EU flagship carbon market by slowing down planned emission cuts and extending pollution permits for free.

The European Union (EU) is planning to revamp its Emissions Trading Systems (ETS), a system that requires industrial and power companies to purchase permits to cover carbon emissions.

On July 17, the European Commission will propose changes to the ETS. Governments are arguing over whether or not to weakened the scheme to help struggling industries.

In a draft paper, the European People's Party - the largest group of legislators in the European Parliament - which will be negotiating the final ETS regulations with EU member states - stated that "adjustments were needed to protect industrial 'competitiveness'".

The EPP, including the political party of European Commission President Ursula von der Leyen, wants to slow down the pace in which emissions are reduced under the ETS by 2030.

The current system is designed to reduce emissions at least by 4.3% annually, increasing to 4.4% in 2028. According to the draft document, from 2031-2035, there should be a reduction in annual emissions of at least 1 percentage point, and even lower after 2035.

According to the draft document that has yet to be published and may still change, the group wants industries to receive free carbon allowances for a longer period of time.

Currently, the EU grants a fixed number of permits free to industries in order to compete with their foreign competitors who 'do not have comparable carbon costs.

The draft stated that "the trajectory should be slowed and pushed back further in time, with a maximum phasing-out of 30 percent before 2030."

The report added that, if other EU policies designed to protect domestic producers from imports of cheaper carbon-intensive products fail to achieve their intended results, the phase out of free permits must be stopped.

Since 2013, the ETS has raised EUR260 billion (US$297 billion), of which most went to national governments. The draft stated that governments should invest more of these proceeds into decarbonising their economy, especially industries that bear the carbon costs.

A spokesperson for the EPP declined to comment on this draft document.

(source: Reuters)