Climate laws face new EU Parliament vote after failed first try

© Reuters. European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium June 17, 2022. REUTERS/Yves Herman

By Kate Abnett

BRUSSELS (Reuters) - The European Parliament will on Wednesday try again to agree more ambitious climate change policies, after rejecting them in a divisive first vote that threatened to delay the EU's green agenda.

Lawmakers rejected reforms to the European Union's carbon market this month over disputes over how ambitious Europe's emissions-cutting policies should be amid soaring energy costs and inflation.

That threatened to delay the EU's overall package of climate laws to clean up Europe's energy, industry and transport sectors and by 2030 cut net EU greenhouse gas emissions by 55%, from 1990 levels.

EU lawmakers vote on Wednesday on the carbon market, a new border tariff on imports of CO2-heavy goods like steel and cement, and a fund to support low-income households affected by CO2 costs.

If successful, the vote will confirm Parliament's position for negotiations with EU countries on the final laws. EU countries plan to agree their own position next week.

Euope's carbon market, or "emissions trading system" (ETS), is the bloc's main emissions-cutting tool. It forces power plants and factories to buy CO2 permits when they pollute, and caps the number of permits available to buy.

"You can't overestimate the impact the ETS file will have on the climate," Swedish socialist lawmaker Jytte Guteland said.

A parliamentary deal appears likely, after groups representing a majority of lawmakers - the European People's Party (EPP), Socialists and Renew lawmakers - agreed a compromise ahead of the vote. ()

EPP lawmaker Esther de Lange said the compromise maintains climate ambition while providing "breathing space for EU industry".

Their compromise would phase out the free CO2 permits industries currently receive by 2032. This issue thwarted the first vote, when Socialists and Green lawmakers rejected the entire law over a 2034 phase-out they deemed too weak. The European Commission, which drafts EU laws, had proposed 2035.

The new law will also expand the carbon market to shipping, launch a second market for buildings and transport, and could restrict financial investors' access to the market under some amedments up for votes.

Under the lawmakers' compromise, the scheme's cap on CO2 permits will fall by 4.4% from 2024, 2.5% from 2026 and 4.6% from 2029, while an extra 70 million permits will be removed in 2024 and 50 million in 2026, to drive faster CO2 cuts.