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The European Union on Sunday struck a deal to expand the reach of its carbon market to include virtually everyone in Europe and not just businesses, and to accelerate its emission-reduction efforts by reducing the availability of CO2 permits.
"From 2027 on, it's crunch time. Everybody needs to reduce emissions by then or will have to pay a lot," said the lead negotiator for the European Parliament, Peter Liese, as quoted by Reuters.
Liese added that he hoped this crunch would encourage more businesses to invest in green energy.
Meanwhile, to stimulate these investments, the EU will phase out free CO2 permits by 2034, evidently deeming them no longer necessary to protect European producers from overseas competition after it also approved a so-called carbon border tax targeting that same competition of producers from jurisdictions with lower emission standards than the bloc.
At the same time, the EU will be gradually reducing the number of CO2 permits available for purchase in a further effort to stimulate investment in low-carbon energy. Some 90 million permits will be removed from the system in 2024, followed by another 27 million in 2026.
Households were not included directly in the scheme but its expansion to cover fuel producers means that households will also feel the impact of Brussels’ emission-cutting efforts.
In an attempt to shield consumers from the worst, legislators agreed to postpone the launch of the expanded carbon market until 2028 should energy prices in 2027 be as high as they are now.
The EU will also set up a fund to support those most vulnerable in the bloc from the adverse financial effects of its emission-reduction efforts, to the tune of around $91 million.
The carbon deal is provisional and has to be approved by the European Parliament and the Council of Europe.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.