European Parliament adopts key climate and energy laws

Last week, the European Parliament gave final approval to several key laws to deliver the Fit for 55 targets. Free allowances under the ETS will be phased out from 2026, road transport and buildings will be covered by the new ETS II from 2027, and the Social Climate Fund and carbon border adjustment mechanism were also approved.

As the Parliament reported on its website, MEPs approved the final versions of laws that representatives of member states had already endorsed at the end of 2022. The laws implement the targets agreed under Fit for 55, through which the Union aims to reduce greenhouse gas (GHG) emissions by at least 55% by 2030 compared with 1990 levels.

Reform of the emissions trading system

The reform of the European Union Emissions Trading System (EU ETS) raises the system’s ambition: greenhouse gas emissions in ETS sectors must be reduced by 62% by 2030 compared with 2005 levels. The reform also phases out free allowances for businesses from 2026 to 2034 and creates a separate new ETS II for fuels used in road transport and for buildings. This will set a carbon price for these sectors from 2027.