European Parliament delays decision to introduce carbon border tax – CBAM

In a surprise vote, members of the European Parliament rejected a set of law proposals within the Fit-for-55 climate package, including the assembly’s position on negotiations to introduce the Carbon Border Adjustment Mechanism – a carbon tax for imported commodities and electricity.

The revision of the European Union’s Emissions Trading System (EU ETS) is on hold for now. The European Parliament voted against the proposal to include other sectors of the economy like buildings and shipping and increase the scope of the scheme to a total of 61% of greenhouse emissions in the EU, from the current 43%.

Namely, the original motion was to adopt 67% as the negotiating position, but a compromise to ease the rule was later achieved. In turn, it led the social democratic and green groups – who are in favor of a more ambitious target – and the far right to withdraw support.

The failure of the main proposal took down the CBAM and Social Climate Fund legislation with it

The motion was then returned to the relevant committee for further discussions. The surprise outcome also spelled failure for the legislation on the related introduction of the Carbon Border Adjustment Mechanism or CBAM – essentially a carbon tax for imported commodities and electricity, and the Social Climate Fund, which would use revenues from the EU ETS to assist the vulnerable population.

The key part of the legislation was supposed to lead to a cut in the number of carbon emission allowances by 70 million in 2024 and 50 million in 2026. The European Commission originally proposed to pull out 117 million carbon credits in 2024. The Fit-for-55 package is envisaged to reduce emissions by 2030 by 55%.

The European Parliament adopted a negotiating position that all new cars and vans will need to have zero emissions by 2035 at the latest

The CBAM is likely to impact countries like the Western Balkans and Turkey financially. The scheme is supposed to pressure them to accelerate decarbonization, particularly in the energy sector, as it affects electricity production and energy-intensive industries, including steel and cement.

In a separate plenary vote, MEPs adopted their position on proposed rules to revise the CO2 emissions performance standards for new cars and vans. With the adopted text for negotiations with member states, they supported the measures designed by the European Commission to reach zero emission road mobility by 2035. Intermediate emissions reduction targets for 2030 would be set at 55% for cars and 50% for light commercial vehicles.