On Tuesday 18th April, approval was granted by the European Parliament on deals achieved with EU member states in late 2022.  Part of the “Fit for 55 package”, a set of proposals to revise and update EU legislation, the rulings will contribute towards the EU’s goal of reducing net greenhouse gas emissions by at least 55%, compared to 1990 levels, by 2030.

These developments bring the EU into line as a leader in international efforts to fight climate change. The full impact the changes will have on asset managers across Europe is yet to be seen but are certainly of relevance to those with a marked ESG or sustainability focus. Without doubt, the costs attached to polluting will increase significantly across industries.

Three key pieces of legislation were passed. Firstly, a strong majority of 413 in favour, with 167 against, approved the reform of the Emissions Trading Systems (ETS). The EU ETS is the world’s first major carbon market and is an essential tool in the EU’s bid to reduce greenhouse gas emissions cost-effectively.

There was further sense of accord with 487 votes in favour, 81 votes against, to approve the rules for the EU’s new carbon leakage instrument. The CBAM, Carbon Border Adjustment Mechanism, is a climate measure designed in compliance with the WTO to prevent the risk of carbon leakage. Covering commodities including iron, steel, electricity, and hydrogen, the MACF will impact costs for importers. A gradual introduction has been proposed for between 2026 and 2034.

Lastly, in reflection of an increasing awareness of the impact of climate change on social systems, go-ahead for EU Social Climate Fund (SCF) was agreed, 521 votes to 75.  This fund will actively combat energy poverty and signals positive progress towards supporting vulnerable households, micro-enterprises and transport users who are affected by lack of access to fuel and affordable energy sources.

https://esgnews.com/eu-parliament-adopts-key-laws-to-reach-2030-climate-target/