EU strikes compromise deal on carbon market reform

EU negotiators agreed to a compromise on carbon market reforms on Thursday, with the bloc keen for a deal this week to show leadership at UN climate talks in Bonn.

Agreement was reached early on Thursday after months of dogged talks among EU nations, the European Parliament and the EU executive to finalize reforms to the EU Emissions Trading System (ETS) for after 2020.

The cap-and-trade system is the EU’s flagship tool for reducing greenhouse gases and meeting its climate goals by regulating emissions at some 12,000 industrial and power installations. But it has suffered from a glut of permits, giving added political urgency to the push for reform.

Negotiations had been stuck over the uses of a new clean technology fund, with some lawmakers and member states demanding that installations with emissions of over 450 grams of carbon dioxide per kilowatt hour be banned from receiving funds. That would rule out coal-fired power plants.

Late on Thursday, negotiators provisionally agreed to the restrictions on the so-called Modernization Fund with the limited exception of sustainable district heating projects in Bulgaria and Romania, EU sources said.

The 28-nation bloc had been pushing for a deal this week to show climate leadership during UN talks this month aimed at finding ways to implement the 2015 Paris accord it helped broker to curb the worst effects of global warming.

“The outcome significantly strengthens the ETS, maintains the environmental integrity of the system, supports innovation and modernization in the energy sector,” Annikky Lamp, a spokeswoman for Estonia, which holds the bloc’s rotating presidency, said in a statement.

The results of the compromise between the EU lawmakers still need to be formally endorsed by member states and the European Parliament.

Coal-dependent Poland had fought hard against the restriction on how the Modernization Fund could be used and likely still has reservations about the deal.