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European Parliament Approves Carbon Market Reforms

The European Parliament voted in favour of planned reforms for the EU’s Emissions Trading System (ETS), as well as the introduction of ETS 2, the Carbon Market Adjustment Mechanism (CBAM), and a new Social Climate Fund on Tuesday. With 413 votes in favour, 167 against and 57 abstentions, MEPs agreed to increase the ambition of the ETS to cut 62% of emissions across covered sectors by 2030 compared to 2005 levels. The ETS will also phase out free allowances to companies from 2026 to 2034, while phasing in the CBAM, with rules for the CBAM receiving 487 votes to 81. MEPs further voted in favour of creating ETS 2 for fuel for road transport and buildings from 2027, with the contingency this will be delayed until 2028 if energy prices are “exceptionally high”. Finally, MEPs agreed that member states will set up an EU Social Climate Fund in 2026 to ensure that the climate transition will be fair and socially inclusive, with 521 votes to 75. These measures form part of the Fit for 55 package, which aims to reduce CO2 emissions by at least 55% by 2030 compared to 1990 levels.  


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