Press Release

EU governments approve extension of polluter pays principle

June 29, 2022

Environment ministers of the EU27 approved a carbon market to regulate key sources of transport emissions, but important exemptions remain.

The EU’s Environment ministers pushed through ambitious proposals on key files of the Fit for 55 package relating to the carbon market, effort sharing between member states and a social climate fund. Green group Transport & Environment (T&E) warns that if exemptions are not removed from the deal, the bloc could miss its 2030 climate target. 

Regulating aviation and shipping emissions

Carlos Calvo Ambel, senior director at T&E, said: “We welcome member states’ decision to green light the first ever carbon market on international shipping. But the outcome of the Council meeting is a step back for European aviation, as they continue to exempt huge chunks of emissions in this industry. The French Presidency fell short on tackling aviation’s climate problem.”

On aviation, ministers refused to integrate extra-EEA flights in the carbon market, as proposed by the European Parliament a few weeks ago. Over 60% of aviation’s pollution will thus lack effective carbon pricing. Non-CO2 effects were not mentioned despite accounting for two thirds of aviation’s climate impact. Ministers proposed to adopt a limited amount of SAF allowances to help airlines pay for green fuels. This will accelerate the transition to clean aviation if, and only if, the right type of SAFs are used, T&E warns. 

For shipping, environment ministers endorsed the Commission proposal to include international shipping in the EU ETS. But they also introduced unnecessary exemptions, which could undermine the effectiveness of the carbon market and create an unlevel playing field in the market. In particular, the exemptions for ferries to islands with under 200,000 inhabitants will only increase air pollution for those islands and reduce incentives to clean up those vessels. 

While member states agreed to start monitoring methane and nitrous oxides – two potent climate warming gases – from ships, these would not be automatically included in the carbon market yet. It was also positive that ministers agreed to already monitor emissions of some smaller cargo ships; the upcoming negotiations with the European Parliament will be an opportunity to extend this coverage to all vessels between 400 and 5,000 gross tonnage.  

Carbon market for road transport and Social Climate Fund

EU ministers agreed to the hotly debated new carbon market for road transport and heating, including both private and commercial users. Their emissions will be regulated as early as 2027.  Member states however missed the opportunity to split the carbon price between fuel suppliers and citizens, a provision proposed by Parliament which would ensure Big Oil pays at a time when they are making bumper profits off the war in Ukraine. 

Despite strong lobbying by Germany, EU solidarity prevailed and the Council maintained the core budget of the Social Climate Fund. But this win masks a bigger loss: member states got rid of the co-financing requirement to the Fund, which halves the revenues that are obliged to go to supporting the poorest households in the transition. EU ministers also removed the obligation to spend all remaining revenues on climate measures, which opens the door to investments in debt relief or big industry, T&E warns. 

Carlos Calvo Ambel said: “Despite resisting the carbon market for road transport for many months over social concerns, the Council failed to include the two main things that would fix that: spending all the revenues on transition support for low-income households  and transferring half of the carbon price onto Big Oil. Unless that is fixed, it could prove an historic mistake.”

Effort sharing between member states 

On the Effort Sharing Regulation, the weak French Presidency amendments were approved. They allow member states to emit more greenhouse gas emissions than the Commission had budgeted for a year ago in its original proposal. This addition is equivalent to the emissions of 20 million cars on the street. To meet its 2030 goal, the EU must minimise total climate damaging gases released into the atmosphere, which is the opposite of what the Council did. 

All files now move to trilogues between the Council, the Parliament and the Commission later this year.

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