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European Parliament votes to phase out CO2 permits by 2032

In a bid to further cut emissions European Parliament lawmakers voted on Wednesday to phase out free CO2 permits which industries receive from the EU carbon market, by 2032.

The first vote on the issue regarding the carbon reforms was nevertheless held up earlier this month, when lawmakers arrived at an impasse due to disputes regarding the pace of the phase-out. The Parliament eventually came to a compromise on Wednesday, setting the completion of the phaseout by 2032.

Under the agreed-upon bill, the cap on CO2 permits will fall by 4.4 percent from 2024, 2.5 percent from 2026 and 4.6 percent from 2029, while an extra 70 million permits will be taken away in 2024 and 50 million in 2026, to up the pace of the CO2 cuts.

The law is not yet finalised, but the vote that took place on Wednesday confirms the Parliament’s position in upcoming negotiations with the EU countries regarding the final decision. EPP lawmaker Esther de Lange said the compromise maintains climate ambition while providing “breathing space for EU industry”.

The newly voted law will now extend the carbon market to shipping, while at the same time launching a second market for buildings and transport, which could result in restrictions for financial investors when accessing markets under some amendments that will be yet subject to voting.

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