There were no major agreements during negotiations on Friday (16 December) to reform the EU’s main climate policy – the emissions trading scheme – with talks due to resume at 11:00 on Saturday morning.

Negotiators from the European Parliament, the European Commission and the Council of the EU, which represents the 27 EU countries, are in a ‘jumbo’ round of talks to reform the EU’s carbon market.

The scheme is the EU’s leading climate policy with the potential to deliver 1,500 million tonnes of CO2 reductions by 2030, according to the lead parliamentary negotiator, Peter Liese.

“It’s really, really, really big,” the German MEP told journalists at a press briefing on Friday.

The ongoing talks, named the “mother of all trialogues” by one official, have one overarching aim – to reduce the EU’s emissions by 55% before the end of the decade, in line with the bloc’s commitment under the Paris Agreement on climate change.

The package combines several pieces of legislation, proposed by the European Commission in 2021:

  • The ETS, which currently covers about 10,000 industrial installations and electricity power plants and is being tightened to align with the EU’s 2030 climate goals;
  • The creation of a separate carbon market to cover road transport and buildings (ETS2);
  • A social climate fund to shield vulnerable households from higher fuel prices caused by the ETS2 and help them finance investments in green technologies;
  • A new carbon border levy to replace a much-criticised system under the main ETS that grants free CO2 pollution permits to certain heavy industries.

All these proposals are interlinked and have their own controversial elements, making it extremely difficult to reach an agreement.

“The atmosphere has in general been very optimistic and constructive from both ends,” said Emma Wiesner, a Swedish MEP who represents the centrist Renew Europe political group in the talks. “However, we still have many pieces of the puzzle left to solve,” she told EURACTIV.

The talks are “tough”, the Greens negotiator Michael Bloss tweeted on Friday morning, adding: “Compromises are on the table, but the goal must be to comply with the Paris Agreement” on climate change.

On Friday, negotiators mainly focused on the main ETS, but they cannot close this without talking about ETS2. They also discussed the social climate fund, but talks on this were quick, with many of the core aspects put to the side as they cannot be agreed without a deal on ETS2.

According to Liese, who spoke to journalists on Friday afternoon, both the European Parliament and the Council have moved from their original mandate, but many controversial aspects remain, including the overall emissions cut that should be made under the main carbon market.

The parties also disagree on when to phase out free CO2 pollution permits, designed to prevent European industries from relocating to places where it is cheaper to emit, and replacing these with the carbon border levy, which was agreed earlier this week.

Alongside this, the parties differ on which groups should be covered by the carbon market for road transport and buildings, with the European Parliament refusing to include private households until 2029.

If this date is brought forwards, then certain conditions need to be met, including a larger social climate fund partially topped up by co-financing from EU countries, according to Liese.

“In the Council’s mandate and in the Commission’s mandate, an old lady or a poor family that lives in a badly insulated house or a badly insulated flat, they are in the ETS2 and we need of course to do every effort to protect them with a bigger social climate fund,” he told journalists.

“A factory that is nearby, next door to the old lady or the poor family is not included if they are below 20 megawatts of emissions and this is, of course, ridiculous,” he added, saying that including these could help bolster the social climate fund.

According to Wiesner, Saturday “will be the day of ETS2”.

“I guess it will put substantially more pressure on both negotiating teams and create more tensions,” she told EURACTIV.

It is still unsure whether the parties can reach an agreement on Saturday or whether talks will roll over into Sunday.

“Nothing is solved until we have a complete package and, with so many open ends, we realised it makes sense to have a break with a night sleep and continue tomorrow for another full day of negotiations,” said Wiesner.

“I don’t expect any dinner celebrations tomorrow night, but my guess is still that I go home to Sweden on Sunday with a satisfying Christmas climate package!” she added.

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[Edited by Frédéric Simon]

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