Committee on the Environment, Climate and Food Safety Ordinary meeting
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ENVI European Parliament
Follow its sittingsPierfrancesco Maran
Who abstained, approved. Amendment 80, paragraph 6. Who is in favor? Who's against, who abstains, who rejected. Amendment 83, paragraph 7.
Who is in favor? Who's against, abstain, rejected. Amendment 84, paragraph 7. Quiz in favor? Quiz against abstaining, I would check.
The vote is open. The vote is closed, and it's approved by 31 against 29. Compromise number three: who is in favor? Quiz against, co-abstain, approved. Amendment 89, paragraph nine, votes in favor, votes against, abstentions, rejected.
Amendment 90, paragraph 9. Quiz in favor? Quiz against, co-abstain, rejected. Amendment 91, paragraph 9. Quiz in favor?
Quiz against, or abstain. Check again. The vote is open. The vote is closed, and it is rejected: 32 against 29 in favor. Compromise number nine: who is in favor?
Who is against it? Who abstained? Approved. Compromise six: who is in favor? Who is against it?
Who abstained? Approved. Amendment 125. Who is in favor? Who is against it?
Who abstained? Rejected. Amendment 144. Who is in favor? Who's against it?
Co abstain, I'll check. The vote is open. The vote is closed, and it has been rejected. 32. Yeah.
Amendment 150. Who is in favor? Who is against it? Who abstained? Adopted.
Amendment 160. Who is in favor? Who's against it? Who abstained? I'll check.
The vote is open. The vote is closed. And it is adopted. Compromise number five, who's in favor? Who's against it?
Who abstained? Adopted. Amendment 163: companies in favor, companies against, companies abstaining rejected. Compromise number seven: co's in favor, co's against, co's abstain. Adopted. Amendment 223: companies in favor, companies against, companies abstain, adopted.
Compromise number 10, 10 votes in favor, quiz against, 0 abstain, adopted. Compromise number 11: quiz in favor, quiz against, co abstain, adopted. Amendment 29: quiz in favor, quiz against, to abstain adopted. Amendment 34: quiz in favor, quiz against, to abstain rejected. Amendment 38, quiz in favor. Who's against?
Who abstains from checking? What is open? What is closed? And it is adopted. Amendment 40, who's in favor?
Who's against it? Who abstained? I will say adopted because I saw the same vote as before. Adopted. Amendment 41, who's in favor?
Who is against it? Who abstained? Rejected. Final vote, it's a vote. The vote is open.
The vote is closed, and it is adopted by 51 votes in favor, 8 against, and no abstentions. Thank you.
Maybe we wait one minute because there will be a lot of noise now.
So, we will now proceed with the consideration of the draft report on the market stability reserve for buildings, road transport, and additional sectors. Give now the floor to the rapporteur, Miss Danusa Neodova.
Yeah. Thank you, Chair.
5 minutes.
Danuše Nerudová
Colleagues, let me be very clear: I fully support the proposal of the Commission on MSR ETS 2 revision. It's the result of an important initiative by 19 member states that will improve allowance price stability. We should implement it as soon as possible. However, as a parliament, our voice needs to be heard. We have demonstrated this in the past and succeeded, for example, with the rule of law, due diligence, and other key regulations.
We cannot be merely a Schambardan registrarman of the council. Otherwise, we would need elections. Otherwise, why would we need an elected parliament in Brussels? My proposals are built on two main pillars, which I believe reflect the core aspirations of this House. The need to push for decarbonization to protect our planet while also ensuring social fairness and a secure, affordable energy supply for our citizens. For that very reason, my amendments, which do not alter the main provisions in the context of the proposed revision, aim to reflect more to ensure environmental as well as social safeguards.
First, strong funding has to be secured for decarbonization. We are already witnessing a decline in green investments since the pandemic, as the ECB has highlighted. If we are serious about delivering on our objectives, we must guarantee that the financial means match our political commitments. Further, we need a robust impact assessment to safeguard our climate ambitions and to avoid the negative social impact of the system. I believe that the commission should reflect on solutions to protect citizens from the potential negative impacts of this system.
Otherwise, we risk significant social unrest in several European countries, as we witnessed with the Yellow Vests in France, for example. In this context, various options are on the table, from stronger caps and better compensation mechanisms to allowing member states to temporarily exempt residential buildings by ensuring the achievement of effort-sharing targets. I'm not saying that all of these measures must be implemented. Rather, they represent a list of possibilities that the commission should carefully consider if we want to preserve social peace in Europe. And, importantly, recent geopolitical developments show why we should also reflect on an emergency break, which would secure an affordable energy supply for the citizens even in times of crisis.
The escalation of conflict involving Iran and related disruptions to LNG supply has already triggered sharp price spikes in European gas and LNG markets. Wholesale gas prices have surged by over 25%, and freight rates jumped more than 40%, with prolonged disruption potentially driving prices even higher. In this context, it's prudent to include in the recitals a clear reference to temporary stronger price ceilings that the commission can activate in case of energy shortage, energy crisis, or blackout. This safeguard is not a retreat from climate ambition. It is a political necessity to ensure system resilience and to protect households and businesses during systemic shocks.
Colleagues, to sum up, my amendments protect the core of the proposal on the table in order to reach a swift agreement with the Council, while also using this opportunity to call for stronger safeguards on both decarbonization, energy supply, and social justice, thereby ensuring that all citizens are on board. This should be our primary goal as elected parliamentarians, and I believe my report can be a good basis for serving this key objective. Thank you.
Marta Temido
Thank you, Chair. Performance standards for buildings remain the most effective tools for reducing fossil fuel dependency and mitigating the impact of higher fuel prices. At the same time, we advocate protecting citizens from price shocks, while maintaining climate goals and ensuring that funds are invested in just transition measures. Therefore, this file is imperative since considerations of social fairness impose additional safeguard measures regarding our citizens, particularly the disadvantaged. We agree with preventing the impact of the ETS two mechanism on buildings, rail transport, and additional factors on citizens' energy bills, while the measures adopted aiming at reducing fossil fuel dependency will not produce their effects.
In this regard, it is paramount that from the implementation period onwards, the commission publishes and makes publicly available a detailed impact assessment of other complementary measures that could help lower the ATS to price.
Marta Temido
Ah, okay. Sorry. Sorry, for translators and interpreters. And alleviate the risk of negative social impacts without endangering the capacity of the Union and its member states to meet the Union's climate targets set out in Regulation EU 2021/1119. Transparency is essential, particularly when social fairness and climate ambition are at stake.
On the other hand, we must ensure better use of carbon pricing revenues, notably through an increased social climate fund budget and stronger conditionalities on ETS1 revenue use to more effectively support vulnerable households in switching away from fossil fuels compared to short-term fuel price increases. Finally, although the recent launch of the European Investment Bank ETS2 front-loading facility will certainly support affordable low-carbon solutions to vulnerable households before carbon pricing begins, it is essential to ensure the scope and speed of the decarbonization investments. The facility's financial resources should be significantly increased, and its scope aligned with social climate fund eligibility criteria. And this is all from my side. Thank you.
Sorry.
Jana Nagyová
Thank you, Chair. I'm going to speak Czech.
At the beginning, I'd like to thank the rapporteur for a very clear statement. ETS two, what do we say? It's a good idea, but it has been adopted in the name of ideology and has not been clearly thought through. Why? The way it is set up, it will create an even bigger divide between the rich and the poor.
Businesses will project the burden into their prices, and everything will be paid for by the end consumer. Those with lower income in rural areas will be worse off. And that is a substantial part of our population now: those who have sent us here to defend their interests. No social fund can substantially help here. It will only create more red tape. I do not understand the logic where, on one hand, we take money from people, and on the other hand, we think we are better off deciding how best to use their money.
And we come up with subsidies. The rule is very often that whatever is subsidized is more expensive because suppliers know people will get subsidies to pay for it. In my opinion, the best solution would be no ETS-2. That would be an ideal scenario. However, that is not realistic.
We understand that. So, I believe it is desirable to intensively start working on ETS not becoming ETS-One, I. E, for allowances not to become a financial instrument and not to be the subject of speculation. No one would want that. We can see the impacts in ETS-1.
And because this is not viable as we see today, and our work is very limited by three paragraphs that have been opened up by the commission for us, I need to call upon you so that within this review, we'll have more frequent market interventions, that is four times a year, so that we increase the amount of allowances in the reserve and reduce the price at which we can intervene. And also, we need to move the deadline for member states so that they can decide to replace the ETS2 system with the national carbon tax by 2027. Yes, we all agree that the situation in the area of the environment is serious, and somebody has to lead. But in this global and very unstable world, we cannot be a role model by destroying our competitiveness and by creating an even greater divide between people. Thank you.
Anna Zaleska.
I will speak Polish.
Anna Zalewska
Thank you very much. I'd like to thank the rapporteur who carried out excellent work on this file. And I'd also like to state that this is a good basis for our debate, a debate that should focus on what the European citizens want and what the member states are seeking to achieve, even if there are some people who do not fully agree. There is a big question surrounding the EU's approach. ETS 2 is problematic because it is not fit for purpose.
And we have known since the very outset, considering what is happening in the world and the overarching climate objectives that the EU had set, that the EU is the only continent that was this ambitious. Seeing the Draghi report, we have to focus on competitiveness, and this approach has been problematic for the competitiveness of EU citizens. There are obligations being placed on our citizens, and we must act clearly to assist. It is too much; enough with this burden of taxes. ETS 2 is related to the directive on buildings that would provide investment capital for the renovation of our buildings for our citizens.
Now, these renovations cannot be carried out for technical, technological, and financial reasons. Renovating a building for the purpose of climate neutrality. That was the goal. Now, if citizens want to have buildings that are energy efficient, they cannot be placed under an enormous tax burden. To stabilize the market here in ETS 2, what we see is that we have to really listen to our citizens.
They cannot purchase electric vehicles, for example. It's impossible. And then, if they're going to have to pay additional taxes. So, the fund that we're discussing for the fair social transition will not be able to work with this ETS 2 in place. Thank you.
Pierfrancesco Maran
Therefore, we reject this ETS too. It should be to go directly to the task, Dasben. Thank you.
Catch the eye, so I will ask you to be on mute, and something that we have. Renew, Sigfrid. Fritz.
Sigrid Friis
Thank you. I will be speaking on behalf of our shadow, Rappa Char and Emma Wissner. Thank you to Rappa Char for your work on this important file. Renew's position has been consistent. Carbon pricing through the ETS is the cornerstone of our climate policy.
It's the most efficient and market-based tool we have to reduce emissions and drive investment in clean technologies. The extension of ETS to the road transport and building sectors, the ETS 2, is an important component of the Green Deal targeting areas where emissions have been persistently difficult to reduce. It's an important element for member states to reach their climate targets. We recognize, however, that this transition must be socially just. That's precisely why we established the Social Climate Fund during the last mandate.
The Social Climate Fund.
They ask to slow down a little, please.
Sigrid Friis
Sorry. The Social Climate Fund is the element that balances the overall package designed to tackle the potential social impacts on our citizens and to ensure that no one is left behind. We are fully aware that the introduction of ETS 2 is a sensitive issue in many member states. Finding the right balance is crucial. In this context, we believe the Commission's proposal for a revised market stability reserve is already a compromise between different interests, providing a necessary tool to manage price volatility without undermining the agreed-upon architecture.
However, this is yet again a proposal without a proper impact assessment, and the consequences on emissions and climate integrity are questionable. For this reason, Renu will support the commission's proposal, but Emma Wissner, a shadow rapporteur and previous ETS negotiator, will therefore not table any amendments on behalf of the Renault Group. The architecture agreed upon in the last mandate, with all safeguards already included in the ETS2 design combined with this proposal, is already a delicate but balanced compromise. Emma looks forward to engaging constructively with all of the colleagues to bring this file to a successful conclusion. Thank you.
Sara Matthieu
Yeah. Thanks a lot, Chair. I'll be replacing our shadow, Marie Toussaint, who could not be here today. First of all, I'd like to thank the reporter for her work on the draft reports. Well, Marie tells me that she has already engaged very constructively with several political groups, and that really deserves our recognition.
We support her approach, as it is pragmatic and balanced. ETS 2 will now start in 2028. For us Greens, it's always been clear: it can only be an effective climate tool if it is embedded in a broader framework of strong European and national sectoral decarbonization instruments, like ambitious CO2 standards for cars and a robust implementation of the EPPD. And crucially, if we provide sufficient financial resources well in advance to support, in particular, the most vulnerable households to phase out fossil fuels before ETS 2 enters into force, because in the current energy crisis, as we have seen, it's also important to point out that there are increasingly affordable and easy-to-install alternatives like plug-in solar panels and batteries, which tenants can actually use to reduce their energy bills. And we're once again seeing that some member states are making mistakes by trying to subsidize and perpetuate gas consumption.
So we've always consistently advocated for a much stronger social climate fund that intervenes well ahead of the start of ETS 2. Fortunately, at the time, most member states strongly opposed the idea. And even today, we do see some within the EPP continue to push for the dismantling of key elements of the European Green Deal that are absolutely necessary to make sure that we make the transition affordable. So, I welcome the clear support in the draft report for complementary decarbonization measures and, of course, the strengthening of the Social Climate Fund, but we need to be more ambitious. The income from all allowances released from the Market Stability Reserve should be used to increase the budget of the Social Climate Fund.
EB front loading is a step in the right direction, but it is not sufficient. We need significantly more. The budget of the SCF should be uncapped, and its duration extended beyond 2032. So, as it stands, ETS 2 remains an imperfect instrument, and I think this file can be an opportunity to send a strong and united message from the democratic forum, one that combines climate ambition with social justice.
Li Andersson
Thank you very much. I think the context of this commission proposal is quite problematic because, under pressure from several national governments, as was mentioned, and also the heavy industry, the commission is now proposing changes to the market stability reserve and the ETS-two that risk undermining the system's climate integrity, and that was also already mentioned, without any proper impact assessment of the effects that this will have. The Market Stability Reserve already contains 100,000,000 additional allowances on top of the ETS2 cap. So if all of these were to be used between 2% and 3.5%, it would also mean that the total supply would rise by 5% to 10%, which cannot be interpreted as being a technical adjustment, but as a political signal that emissions can increase. I do not think we should respond to high price projections by allowing more emissions.
I do not think that's the right way to go, from a climate point of view nor from a social justice point of view. But the only sustainable way, in the long run, to contain prices is to reduce demand for allowances, and that is through strong energy efficiency, strong investment in affordable green mobility, affordable green heating, strong complementary policies, and also, of course, keeping the incentives in place for these investments to happen in the member states. Yet, at the same time, we're also seeing many member states pushing to weaken key measures, such as the phase-out of new CO2-emitting vehicles or green heating standards, and these are also measures that would drive carbon prices up, not down. So, instead of diluting the system with additional allowances, I think we need to strengthen complementary policies, accelerate socially targeted climate investments, front-load, as was mentioned, and strengthen the social climate fund. And as I see it, this is the only way to sustainably contain ETS2 prices in the long run, while at the same time sticking to the promise and the principle of delivering on Europe's climate targets.
Anja Arndt
You. I'm going to speak in German. Thank you, German. It's an irresponsible intervention in the market. The quantities, prices, and certificate rules are constantly being adjusted.
This is not a free market. It's a political CO2 tax, despite the fact that we have no tax on raising companies in the EU. Since 2021, Germany has a tax on heating oil, a tax on gas, and a tax on fuel. And from 2028, this is exactly what is going to be replicated in Europe. German industry and consumers have already borne a serious burden.
Later.
Anja Arndt
And this is simply going to take an additional toll on artisans and the industry. More and more people are in fuel poverty and fuel debt because of the cost of living crisis. According to the statistics from the federal authorities, in 2024, some 4 million people were in fuel poverty and couldn't pay their bills. That's one out of every 20 citizens. This surely cannot be your intention.
Your intention can't be to impose such an additional burden on every single citizen of the EU from 2028 onwards with a bit of sleight of hand with the rules. The logical consequence is not just more tinkering with the market reserve. The logical consequence is the total abolition of the ETS. It won't have any measurable or quantifiable impact on the climate anyway. What else needs to happen before you realize that the ETS is an abject failure and you stop simply raiding the pockets of our citizens?
Thank you.
Pierfrancesco Maran
We move to the KHDI. The first to speak is Peter Leese from a remote location. If somebody wants to use the catch the eye, I close after Peter Lise ends.
Peter Liese
Good morning. Thank you very much. Sorry that I can't be with you, but I think this is an important debate. Since this weekend, we have seen that prices of gas and oil have dramatically increased. And this is not because of the ETS.
It's because of what happens in Iran and its consequences. So, we see that we are very dependent, and prices will always increase when something happens in the world because we are dependent on gas and oil. And that's why we need to fix this. So, really, we need to fix this, and ETS 2 is the main instrument to reduce our dependency on gas and oil. It is, I think, a good system, but the problem is that member states are not really doing what they should do when they should give back the money, and they should start to give the money to the citizens already now because front-loading is possible.
The proposal of the commission is a challenge because experts have calculated that it weakens climate ambition. And I think that is a problem, and it should be discussed. Also, the postponement is a problem, and I think the only good thing in favor of the postponement, and that has to be acknowledged, is that the ETS2 is postponed, but still the Social Climate Fund has the same size. So it is a victory for those that wanted a higher Social Climate Fund, and it should be acknowledged. I don't think we should further weaken the ETS.
I think the proposal of the commission is already a challenge. I'm happy to support it in the spirit of compromise. But when 19 member states ask for something and the commission delivers, we should not endanger it, and we should not put additional requests on the table; otherwise, we will be stuck. I think we need to find a good compromise based on the Commission's proposal. Thank you.
Pierfrancesco Maran
Thank you. We have more or less 15 people, so I will ask you to help respect the time. Now I also try to respect the order of different groups, César Luena for S and D. Thank you.
César Luena
Thank you very much, Chair. I hadn't heard my name. ETS 2 is important for car met neutrality and road transport. If we are to sap its functioning, then we are going to sap our climate ambition. We have to make sure that there is stability so that it's predictable, with a clear signal of price, because it's not just an ancillary tool.
It is a driving force, and it will protect the stability of the system. I remember that we had a chance in the past; we saw that the price of CO2 fell, and that really was a problem. We have to be very careful that this does not happen again. The commission's proposal is balanced. It's technical.
Yes. It gives us tools so that we make sure that there isn't extreme volatility, providing a clear signal of price. And a couple of points really for the rapporteur: be careful so that ET asked too doesn't seem like it's just a provisional measure. And second, make sure that there is no systematic market intervention, because we've got to avoid that as it would weaken the signal. Those are two things that we need to avoid.
Thank you.
On the note, capitulates.
Ondřej Knotek
Thank you very much, Mr. Chairman. I would like to thank the reporters and the commission for proposing at least some easing of the ETS through the MSR. We must also see it in the broader picture. This legislation hasn't come into place yet. Should start at 28, and we are already correcting.
Likewise, we did sustainable reporting for CO2 standards for cars, etc. Maybe in the future, we shall do the legislation more properly. But, to the point, we should get the maximum from this file. Of course, with the 600,000,000 allowances in the reserve fund, defined in other legislation, we cannot do much, but at least we shall try to do so. It is clear that the impact of ETS 2 would be high.
It's great. It is postponed. We shall ask for more postponements, and also for relevant revisions of legislation to be postponed further. And just allow me to react to Mr. Lisa. I don't agree that the member states don't do a lot.
I mean, the member states know their situation. There are different situations in member states. And simply being the fastest in emission reductions worldwide will not deliver. So, we must be pragmatic, and the ETS 2 must be set as pragmatically as possible. And, hopefully, at least a little bit, we will be able to contribute to this pragmatic approach also with this small file.
Thank you very much.
Beatrice Timgren
Thank you, Sherry. I will speak in Swedish. When?
This was launched; the Commission's president said this was a growth strategy that is going to help with jobs. It's going to help the climate. However, that just seems to be an empty wish. And studies have shown that the decline in the chemical industry has started to really increase since 2020, and there have been 20,000 jobs disappearing in the chemical sector. 20,000 jobs.
And, of course, this is a fundamental question. Does ETS actually work? Because if production simply moves outside of Europe, so do the emissions. They move outside Europe as well. And if you've been there, now we had the auction of the emission rights, and then we see the prices going up.
So, my question to the commission is quite simple. How does the Commission evaluate the risk that the current development of the ETS and the higher price of the auction rights will impact all of the industries and jobs in Europe?
Martin Hojsík
Thank you, Mr. Chairman, thank you also to the rapporteur for a very good report. I'd also like to thank the rapporteur for being so brave and really tackling this matter more broadly than the original proposal by the Commission. I think it's important for these changes to be socially sensitive so that we help our citizens and help our economy. And let's say it openly: it really isn't only about the climate.
This is about our freedom and our security. Just as you've seen what Putin is doing in Ukraine, how he's used gas basically as a weapon against the EU, against us, the citizens of the EU, we also see the impact today during the war in Iran, and we see how fast the prices of energy have rocketed. I think, therefore, it's crucial for us to look very closely at where this money is going: the income from ETS 1 and ETS 2. And this is where I see the major problem. For instance, in Slovakia, this money is really not going into decarbonization.
It's not going to ease the pressure on the price of allowances. There are more than €2,000,000,000 in the environmental fund in Slovakia, and this money has not been used for its original purpose. And unfortunately, the member states are blocking the use of this money, the profits from ETS, so that this money can be used for decarbonization, for the climate dividend, and so that it is really compulsory. And I believe it's up to us, the Parliament, to fight for this. And I believe we should be strong in this and resolute.
Jessica Polfjärd
Thank you, Chair. And I think, with this proposal to change the MSR two, the EU Commission has taken member states' concerns on board and agreed to soften the start of ETS two. Still, the ETS 2 was also postponed by a year. And the ETS 2 will be a key driver of the clean transition in sectors that have so far failed to decarbonize. It is also an essential tool for strengthening our independence from fossil fuel imports.
And I think that the current geopolitical situation once again underlines how crucial this independence is. The problem with the current MSR proposal is that it will weaken the price signals. Going any further would risk undermining the entire ATS system and damaging the climate transition. Of course, there are social challenges that we must take into account. However, there are already many social safeguards in place, in addition to funds and other financial instruments, that will help citizens in this transition.
Any further changes to the MSR and ETS 2 would seriously undermine its effectiveness. And therefore, I think we must proceed with great care. Thank you.
Ms. Sandi?
Heléne Fritzon
Thank you. Thank you, Kjell. Yes. One of the main benefits of the ETS is that it paves the way for investments in the green transition and creates a business case for decarbonization. Investments are also completely necessary in order to make the green transition work for ordinary people.
So, they can heat their homes and transport themselves in ways that are not only sustainable but also affordable. Without investments, we will not have alternatives to fossil fuels. We know that. But this system only works if there is a long-term rule book, and we cannot change the rules all the time. So, as we move forward with changes to the MSR, we also need to agree that it is time for implementation by the member states.
We need to get the system going, and we cannot add a long list of possible ways that the ETS2 can be changed even further in the future. So, because it will be very confusing. So I think the keyword is balance, as the council and the commission proposal is. I think it's the best way forward. Thank you.
Dolors Montserrat
Thank you very much, Chairman. European families are facing a very real risk of cost of living increases in transport, energy, and heating. All these bills that they have to pay are increasing in a ridiculous fashion: 22 to 27% for transport, and domestic heating could go up by 31 to 40%. I personally am not convinced by ETS 2, and this is why I've listened carefully to our rapporteur, because she has sought to give a clear-headed evaluation of the real cost, impact, and implications for families. We need this assessment and these figures.
And the second thing the rapporteur has done is make it clear that it is possible for us to suspend the implementation of ETS, at least for residential property, and we could also introduce some sort of reimbursement for more vulnerable families. We could also envisage more social protection measures in cases such as emergencies in energy supply, for example, and we could have more social protection provisions to support families and vulnerable people in the case of energy transport and heating cost explosions. So, there needs to be something done by the public sector because we have to ensure that the cost of decarbonization is not borne by the citizens. Europe has to be fair and just. It has to be a Europe that thinks about its families and its citizens.
And so, it's good that the rapporteur has reflected this. Thank you.
Thank you. Stine Bossa.
Stine Bosse
Thank you very much. Actually, I don't want to repeat what Peter Lis said. I agree completely. If anything, what we see now in the world should make us speed up this transition. And I want to remind both the ECR and the PFE, this is not only a question of the green transition.
This is a question of our security. It's a question of this union's independence. And you should keep that in mind when you think about the ETS system. Member states that invest in changing their energy supply are now in a better position than before. That is, of course, a comment especially for Mr.
Knotek. And then I just also wanted to talk about growth, specifically for the ECR Group. If we talk about growth, the growth in CleanTech in China last year was 84%. In the European Union, 78%. Not bad.
Not bad at all because that's, of course, in real numbers, it's higher. In the US, 23%. That's probably why Mr. Trump doesn't like windmills. I mean, come on. Let's wake up, and let's celebrate that we live in a union where we can also afford to have social compensation.
Where on earth in the world do they have that? Let's celebrate that, and let's cherish the things that we actually have at hand. Thank you.
Thank you. Thank you, Chair.
Ingeborg Ter Laak
And first of all, thanks to the rapporteur, Ms. Nourudjova, thank you for the constructive work on this file and the open cooperation with all your colleagues. The Market Stability Reserve plays an important role in ensuring that the new Emission Trading System for buildings and road transport can function in a predictable and stable way. The commission's proposal aims to smooth some of the sharp triggers in the system to improve the functioning of the reserve. In principle, I see the merits of this approach.
At the same time, I have some concerns about several additions made in the draft report. Some of the proposed changes may risk the system intervening more than necessary and could create additional uncertainties for the market. I believe we should be careful not to constantly adjust the rules in a way that undermines confidence in the ETS system. And in particular, I'm concerned about the recycling suggestion that member states could temporarily not apply the system to residential buildings, strengthening or prolonging the price cap of EUR 45, or further just adjusting the market stability reserve in order to compensate households. Moreover, I believe that we should address the social impact.
So, that's good about the proposal. But I believe that we should be careful to create much more flexibility. That's one step away from the system. Instead, we should focus on what's good about the policy, such as the climate fund and the national support measures being set here. So, those are specifically designed to address the social impact and preserve the integrity of the carbon market.
So, thank you.
Dariusz Joński
Thank you, sir. I will speak in Polish because it's a very important topic in my country, and I would like to be heard in my country as well. So.
The European Union has weighty responsibilities here, and we need to be heard outside this building. Every single week, we meet with representatives from the various sectors who are concerned about competitiveness, and they are desperate for help. I could cite a number, but the car industry is a case in point. We can see how their competitiveness has been undermined, not least because of energy prices. Also, glass houses and the agriculture industry.
People are concerned about whether they can afford to keep them running. This is not just in Spain and Portugal. It's also in my country where ceramics, for example, another industry under serious threat, is a strategic industry. You need to do something about this as a matter of urgency. And I'm saying this because many of us are concerned about ecology and our climate.
Yes. We're concerned that we invest, but we are also concerned that we have a clear focus on sustainability for the industry and for the consumer. If we don't want to be overtaken by the Chinese, the Americans, or the Indians, and if we don't want our industry to be squeezed out by these other countries' industries, then we need to restructure the ETS. And essentially, all presidents and prime ministers of member states are aware of this and even prepared to articulate it. They're aware of the threats to the industry.
So, I think it's important that the rapporteur is willing to consider more realistic solutions. And I do think that we need to embrace realism and make sure that we don't make vulnerable people and certain industries foot the bill. We also need to protect transport, for example. So, I think the revision of ETS has to be substantial. Thank you.
Alukovitsch.
Bartosz Arłukowicz
Thank you. Governments are responsible for protecting their citizens and ensuring their security, and this is exactly what is at stake here. We need to ensure security for our citizens. Of course, we need to take action on climate issues, as has been said. Of course, we need to realize that there can be unknown threats around the corner.
We've seen what is happening now in the Middle East. We've seen what is in Ukraine. We've seen energy crises in the past, and we see what's happening in the US. All these are factors which mean we've got to be flexible and responsive, and we've got to be agile because our opponents are, of course, all out to ensure that we are not. I turned to my Spanish colleagues and asked them, "Did you foresee what would happen with tariffs?"
To my French colleagues, did you foresee what was going to happen in the course of the last week or two: all these tariff threats and worse? President Trump has said a lot of things which could have a very adverse impact on us, our country, our citizens, our environment, and our lives. And therefore, we've got to ensure that realism is the order of the day. We can't just be blinkered, and we have to be aware that the world is changing. Thank you.
Thank you. Sean Kelly.
Seán Kelly
Thank you very much. I support what Peter, Lisa, and my EPP colleagues have said in relation to supporting the ETS. It is a key market-based instrument for emissions reduction, and it's a tried and proven system. We do have targets for emissions reductions, and anything that would interfere with the effective instruments we use to bring that about, I think, would send the wrong signal and probably put in jeopardy our chances of reaching our targets, which we are legally bound to do everything we can to reach. ETS is a tried and proven system, and it brings predictability to businesses and what they are likely to do.
So any postponement or any amendments to ETS 2 would undermine, I think, the effectiveness of the policy. Moving the goalpost would probably cause businesses to stop investments, and that's the last thing we want. So, predictability, desirability, legal requirements, and practicality all suggest that what Peter Lisa is saying, I think, makes sense, and I support it. Thank you very much.
Pierfrancesco Maran
Thank you. We have a very large debate. Now we leave the floor to the commission: Mette Quinn, Head of Unit Claim, Klima B1.
Speaker 52
Yes. Thank you very much. I would like to start by saying that the ETS2 framework already contains strong safeguards to avoid high prices and sudden price increases. This was already included in the original ETS proposal and agreement. But what we have done with this new proposal is that we have proposed very targeted amendments to the MSR to ensure further stability and predictability for market prices and a smoother start of the system.
Speaker 55
So the proposed changes by the Commission are a response to a very constructive proposal by 19 member states in the non-paper that they shared with the Commission in July. The proposal on the MSR addresses three of the requests from the 19 member states. In addition, they also asked for early auctioning, and we have addressed this in a separate proposal in a delegated act on the Commission auctioning regulation, which will be adopted very soon. These changes come in addition to the one-year postponement of the start of the ETS2 in 2028 that was agreed upon by the co-legislators under the European Climate Law amendments. And we have also listened to many of you, honorable members, and have designed, together with the EIB, the ETS2 front-loading facility that was just started on February 4.
Speaker 51
This facility will make available €3,000,000,000 for member states to pre-finance investments in clean, affordable energy and transport solutions for low- and middle-income households and small businesses. So let me now go to some of the issues that were raised here in the debate this morning. First of all, one of the honorable members was mentioning that it's not enough to have finance and to have the technologies in place. We cannot leave it to the citizens. But here, I would like to reply that the citizens are certainly not alone in this transition.
We did, from the beginning, set out that we will have, in addition to the ETS two price signals, the Social Climate Fund. These two instruments go hand in hand. The Social Climate Fund is meant to support the most vulnerable citizens in their transition. The Social Climate Fund has a dual solidarity. It has solidarity between the member states and for the most vulnerable groups.
It's also very important that the ETS2 is not a single instrument. It is in combination with national measures. These are really complementary. So, national measures are very important to ensure the success of decarbonization in the road transport and building sectors. So, there is discretion for member states to decide how to help citizens in this journey of transition.
They are the Social Climate Fund, but there's also the ETS2 revenues that will now be made available earlier through the early auctioning, as well as with the possibility to use the front-loading facility of the EIB. There are a number of good practices that the Commission has shared, and these are available for consultation. For example, France has implemented very good schemes for leasing small vehicles. It can be very useful in rural areas, for example, but there are many other measures available. Then, I would like to address the issue around residential buildings.
Here, I would like to say that differentiating between residential and commercial emissions from buildings would be impractically very challenging and expensive, and it would involve an additional administrative burden. The regulated entities in ETS2 are the fuel providers, and they are not able to differentiate whether the fuels they are distributing go to residential or commercial use. Very often, they don't know who the final consumer is, as there are several intermediaries in between. So, this would be administratively very heavy and difficult to use. Then there were also some questions that we now need stronger price mechanisms if we have extreme or emergency situations.
And there, I would say that what we are proposing will significantly strengthen the price mechanism. And we also already have other safeguards to help prevent any high price shocks. First, we start by auctioning 130% of allowances, so we ensure that there is oversupply right from the beginning. This will ensure a smooth start and avoid price shocks. Secondly, whenever the price rose too quickly,
Speaker 51
It more than doubles over three months compared to the previous six months; then 60,000,000 allowances will be released into the market from the Market Stability Reserve. This is already in the ETS directive. So, this means that we have a strong response. But the response is even quicker in the first year. If the price rises 1.5x over three months compared to the previous six months, then we will be able to trigger and release the 50,000,000 allowances.
So this means we are very close with this mechanism to being able to release the same size as the actual annual reductions because the annual reductions in ETS 2 should be around 60,000,000 tonnes per year. So, this is almost the same size. So it is a substantial measure. And if we have extreme emergency cases, we have already built in that if the price triples over a similar period, then 150,000,000 additional allowances will be released into the market. That is a rule-based system.
This will happen. So this is a very big measure to ensure that prices will not go very high. Then it was pointed out that the commission didn't do a new impact assessment, and that is true. We are building this proposal on the impact assessment from 2021 for the EU ETS and the MSR review. Several elements that we are now addressing were already covered in the impact assessment for the last revision of the ETS directive that established the MSR for ETS 2.
The Commission is also tasked, under the MSR decision, to continuously monitor the functioning of the reserve and, if necessary, propose a review to improve the effectiveness, administration, and practical application. And this is what we are doing. So here, these amendments are very limited to specific adjustments in the stability reserve for the ETS 2, and we are not changing or proposing to change the overall design of the MSR. We are really focused on ensuring price stability and a smooth start. So, this we consider is in line with the better regulation framework.
Yes. So, I think I was answering more or less the question. So then, I would like to just conclude that, taken together, we see that the proposals in the Commission proposal are really going to further smooth the introduction of the ETS-two by increasing price predictability both in the short and the long term, and allowing a very smooth transition to this new system. The external price predictions by the market analysis have already gone down significantly since the proposal was first announced by Commissioner Hoekstra in October. So, with these proposals and together with the member states, we are looking forward to making the transition to cleaner heating and mobility a big success.
I would like to recall that, in addition to these changes, and as I mentioned in the beginning, we are proposing an earlier start of the HS2 auctioning, so revenues will be available earlier for investments. And this is together with the European Investment Bank's front-loading facility. We all agree that the transition to climate neutrality needs to be just and fair, and we need to take into account different national circumstances and provide affordable solutions. The transformation will not succeed if it does not address the social impacts on the citizens. Thank you.
Thank you. Now we go.
Danuše Nerudová
Yeah. Thank you again, colleagues, for your constructive comments. I believe we all want to move swiftly with this file in order to ensure price stability, but we shouldn't miss the opportunity to also make the Parliament's voice heard. A number of colleagues mentioned the social aspects. I believe my report already focuses strongly on this challenge, but I'm very happy to work further with you on the file.
At the same time, we need to keep the text as balanced as possible. We know that many member states would prefer to implement the system without changes, as they have already moved very quickly in decarbonization. And, again, this file is about safeguards in ETS2. This is my responsibility as a rapporteur. I want to build a strong majority, succeed in the end, and deliver to our citizens.
Thank you.
Pierfrancesco Maran
Thank you so much. I inform you that the deadline for amendments is September 4th at 4 PM. We had a large debate. I support the fact that we should stay on topic for the amendments. The vote in the ENVI will be on April 15, and the plenary should be on 04/02/2026.
So now we switch to the next topic that is strictly connected because we are talking about the first ETS.
Let me see. It's transparent.
And the revenues of the ETS. So, it's an exchange of views with the Commission on the transparency, traceability, and public visibility of revenues derived from the ETS, as established by Directive 2003/87/EC and amended by Directive 2023/959. We leave the follow-up to Matthew Quinn from the Commission.
Speaker 51
Yes. Thank you very much. So, I would like to give a short presentation on the use, transparency, and visibility of the ETS-one revenues. So I will briefly go through the framework, how we are reporting and monitoring, and how the spending looks in practice. Yes.
Speaker 58
So first, this is the first slide. It was printed. What? I don't know. It starts with this one.
Speaker 51
Yes. So first, on the rules that are applicable to the member states. Until the last revision, 50% of the ETS-one revenues should be spent for the different purposes that are set out in the ETS directive. At the last revision, we changed this, and now all revenues must be spent on the purposes set out in this article. It is possible for the member state to channel the revenues via the general budget.
It means that they don't have to set out a dedicated ring-fencing of these funds, but they can just report on how they are spending it via the general budget. The purposes cover many different elements, and there were also new elements added in the last revision. So, we now have a very broad range of climate and social activities that can be covered. In addition, there are some member states with a high ratio of shipping companies that have to spend some of the revenues on specific maritime purposes. A new element that was introduced with the last revision was that member states must ensure visibility, and I'm going to come back to how this visibility can be ensured.
Next slide, please. So one back, please. So, we have basically six major categories that are listed in the ETS directive. First of all, clean technologies in energy and industry. This is about developing renewable energies, rolling out grids for electricity transmission, and also including the production of electricity from renewables for self-consumption and renewable energy communities.
There are rules around using it for energy efficiency improvements in district heating systems, insulation, renovation, and also for research and development in this area. Then, we have a specific area around adaptation and biodiversity. So the whole area of avoiding deforestation, afforestation, reforestation, and also soil sequestration, etc. Moving to the next slide. Yes.
So, there are a number of social supports that can also be financed with the revenues, in particular to support lower- and middle-income households in the transition to finance national climate dividend schemes. But here, they have to be linked to having a proven positive environmental impact. It is possible to support different areas around skills, skills formation, reallocation of labor, upskilling, and reskilling of workers that are potentially affected by the transition. And then, it's also possible to provide climate finance in accordance with the Paris finance goals in vulnerable third countries. Next slide, please.
There's a fourth element: to support industrial emissions reductions and removals, in particular, the safe capture, geological storage of CO2, and carbon removal methods. And it is also possible to address any residual risks of carbon leakage in the sectors covered by CBEM in accordance with the stated rules. Then there's the area of transport: support for shifting all sorts of transport modes to decarbonized transport modes. This includes rail, road, maritime, aviation, and sustainable alternative fuels. And then, as a final element, the revenues can be used for administrative expenses that member states have to manage the EU ETS.
On reporting and monitoring. The member states have to report annually on how they use their revenues by July, and we provide from the Commission a template for how to do that. We have revised the template in 2024 following the last revisions to incorporate all the new requirements. There is also a specific article: if the commission doesn't think that the information we get from the member states is sufficiently detailed, then we could request the member state to resubmit and provide more detailed information. We have, at the moment, a contract that is looking into the compliance of spending since the 100% obligation was introduced.
We now have the full data set of 2024 revenues that we can look at. These results are expected to come after the summer, and this will provide us with more information on how member states are really reporting and how we could improve the reporting. We also published the information in the Carbon Market Report, which normally comes out in November, and in the Climate Action Progress Report. So, we have had some issues with the quality of the reporting. There have been wrong reports or mistakes.
There have also been some insufficient descriptions, so it was hard to understand what was really supported and sometimes even a bit misleading. All these, we have tried to address with improved reporting guidance and instructions, and we are regularly exchanging with member states on how the reporting is being done and should be done. And here's just an overview of the table that member states are reporting. When the slide shifts, I'll try again. Now, we quickly go to the next, I think.
So, it's a fairly big table to report on, but it also provides quite a lot of information. And how is the spending done in practice? There are basically three main approaches. There are 7 member states that mainly take ad hoc decisions on concrete projects. Then there are another seven member states that have set up dedicated funds.
Next slide, please. And then there are 13 member states who prefer to have no earmarking but just report on how they're spending on climate purposes in the general budget. So, they look at projects that have a financial value equal to the revenues they receive from the ETS. We see that having such dedicated funds, like seven member states already do, really helps keep track and ensure full transparency on what has been spent and what is still to be spent, and to ensure that we monitor over time how it's spent on the right purposes. And this is really important now that we have gone from 50% to 100%, that we will be able to really show what has been spent and also ensure that there is proper visibility of what has been spent under the yes, and what has been spent.
So, I would just like to show an overview. Please, next slide. So here, we have an overview of how it has been reported by member states on how they use their revenues. So there's a very big share that is going to public transport and mobility in general. There's also a very big share in energy supply, energy efficiency, heating, and cooling.
What we can see is that a very small share of the ETS revenues from ETS 1 goes to industrial decarbonization; only 5% has been reported in that category. This graph doesn't include the carbon leakage instruments such as indirect cost compensation, roughly 5,500,000,000 per year is being spent, and also the free allowances that have been given in the area of around EUR 40,000,000,000 per year. Next slide, please. Here, I just want to show the visibility. We have on our website the labels that should be placed on all projects that are funded with ETS revenues, either funded or co-funded.
It is very important to acknowledge the origin of the EU support that has been received. And we also have instructions, or shall we say guidance, on how this is best used. We have just updated our website. So, we now also have a better view of how member states are spending their revenues in different categories. And as I said earlier, we are now working to have a deep dive into these different spending categories.
So, we will be able to update the website further over the summer with more detailed information. Next slide, please. But what I want to also mention is that the European Environmental Agency, on their website, has some best practices that they publish. So, it's possible to see some really good examples of what member states have done with their ETS revenues. Thank you very much.
This was the presentation.
Pierfrancesco Maran
Thank you. Now, we open the floor to the group. So we start with EPP from remote Peter Lise for 2 minutes.
Peter Liese
Yeah. Thank you, Chair, and thank you to the Commission. We need to speak about solutions, indeed. We speak about the challenges and the burden, but here, we speak about solutions. Technologies are available in almost all sectors of the economy to decarbonize.
And the challenge is that the member states really need to spend the money with purpose. It cannot be repeated often enough that now member states have the obligation to spend 100% of the revenues for the intended purpose, not only the funds. In EPS 2, the Social Climate Fund, and in EPS 1, the Modernization Innovation Fund, all the money should be spent on purpose, and the member states have the obligation to make this transparent. And, yeah, from the presentation—a very good presentation—it was not completely clear. Are the member states really living up to their obligations?
So, is it really to be ensured that member states do what they should do and that this is also visible? My perception is that in all the member states, including the one I know best, Germany, it can be much better; the visibility must be better, and also the targeted spending of the money should be improved. I think 5% for decarbonization of the industry is not enough. We have big challenges in the industry. And when we want to be competitive, the money should be spent.
Heavy industry is spending much more money. The revenues that they pay are much more than 5%. They should receive much more than 5%. Three questions for the commission. First of all, on the modernization front, can you give us an overview of how that money is spent in the recipient member states?
Is it going well, or are there serious shortcomings? Second question: I know EPS 2 and EPS 1 are also connected in this way. A part of EPS1 revenues goes to the social climate fund. I think it's a scandal that many member states didn't present their ideas for a social climate fund. And what is the European Commission doing to make this finally happen?
No. We need to offer solutions to the citizens, and the money is available now from different sources. What is the commission doing to encourage member states to present their social climate plan? Thank you.
Thank you. And Annalisa Corrado for SND.
Annalisa Corrado
Thank you very much. Thank you to the commission for this presentation. The ETS system is one of the pillars of EU climate policy for decarbonization, reducing emissions, but it's also the only way that we can strengthen the competitiveness and the strategic autonomy of Europe. However, we increasingly see that there is a new rhetoric that calls the ETS a cost for citizens and for businesses, and it's a paradox. We're talking a lot about the price of ETS, rather than the use of the revenue.
According to the data from the commission, since 2013, ETFs have generated some 260,000,000,000 in revenue. And nigh on 80% of these resources have gone to the national budgets. When we look at these resources and how they are actually used, transparency, unfortunately, is very limited. For years, ETS revenues were essentially put into the budgets of the national governments. We cannot see them specifically.
If the citizens could see them clearly and saw how they were being used for energy efficiency, transport, renewables, and boosting industry, the ETS would be seen more for what it is: an investment tool for boosting the EU economy. Now in Italy, for the last 2 years, the ETS system has generated some 5,000,000,000 in revenue. According to the ECOA study, from 2018 to 2022, only 9% of ETS were earmarked for an identifiable way for the energy transition. According to the data from the commission, the quota was 0% in 2023 and 2024. To be clear, we should look at the delays in reporting, but the political point remains.
The Italian government came up with an energy decree that would sterilize the electrification in ETS, which weakens the price and slows down the transition from fossil fuels, which we know are the top cause of exorbitant energy prices. That is why we have a motion that will soon be on the commission's table, because this is not just a national point that I am concluding. It is an issue of the integrity of the European ETS system that is so important for our climate policy, but also for our industrial competitiveness at the EU level. Two questions for the commission. First, do you think that the data you have today are satisfactory when it comes to national use of ETS, transparency, and public visibility?
Second, considering national measures that could neutralize the carbon price, do you think that there is a problem with the integrity of the ETS system? Thank you.
Ondřej Knotek
Thank you very much, Mr. Chairman, distinguished colleagues. I had to laugh a little bit when our distinguished colleague Petroliza was talking about the scandal that some member states do not have the social climate fund ready. Wake-up call. Maybe there will be member states that will never implement the ETS 2 nor the social climate fund. And for me, much more scandalous is that the current ETS one is being speculated, and therefore, the price today is between €65 and €85, one of the most expensive worldwide.
And the same wrong architecture is now to be used for the ETS 2, which will make, again, this tool, like ETS 1, a wrong tool. So, what is the correct strategy? The correct strategy is, of course, to make changes in ETS one. As much as possible, try to postpone ETS two, especially after '29, because I believe that after the next European elections, there will be much more common sense. But now, a little bit on the transparency.
As long as the ETS is in place, withdrawing it is not simple. It's not like that. So we must make sure that the concerns of the industry, as well as gas and coal power plant generations, are taken into consideration. The revenues from interest should remain in the regions and in the impacted sectors. This is extremely important.
We also need to change this speculation and also secondary trading. It should be like a closed loop. Today, there are so many players in the system, and it makes the system expensive. And we shall understand that our priority should be that the energy-intensive factories continue running. And what's going on in the ETS is that they may apply for funding from the modernization fund, but they are forced to use some best available technology, which might work for some other factories in other parts of Europe, but will never work for that one specific factory in that one specific region.
Of course, we can talk in the plural. And this is the most important thing: simply do not tell the industry what the best technologies are. Let them decarbonize, and maybe then they will be able to use the funds, and we will not have such discussions. So, these were the key messages on behalf of the Patriots, and thank you very much. Have a good day.
Anna Zalewska
Thank you. I will speak Polish.
Thank you very much to the commission for this attempt to explain.
In detail.
Anna Zalewska
In terms of what can be done to monitor what is happening with the ETS revenue. I think here, there is quite a bit of climate populism that is emerging, especially when it comes to the ETS and financing as well. When we look at the member states' budgets, in the 2014 directive, we tried to keep the financial institutions in there, but then there was the problem with speculation during the pandemic. And we were all shut inside our own homes. ETS increased 4-fold.
The majority of businesses on the market are not controlled in a detailed manner. There are no checks on them. Citizens are stating that they are very fed up with the way things are working. Because what we are witnessing is a 37% reduction in emissions under this system. But precisely, what we saw during the pandemic was that we had economic crises.
We have had this ongoing in our member states. Germany also has a responsibility when it comes to the ETS system. And now, they want to use this and try to apply it throughout the EU. With the climate policy that was proposed by Angela Merkel. There's a structural economic crisis in Germany.
And I remember that President von der Leyen said that we have to review ETS for the purposes of climate neutrality and change the strategy for a clean industry through the NZIA. So that means that we need to look at those companies that produce energy via coal, and that they would have to close. This will not be accepted in Europe. And so, I think the Commission now is going to have to take very seriously the various situations that exist in different member states. And where ETS has not served the objectives of those countries, looking at that financial pyramid that was constructed for the purposes of the environment, apparently.
Stine Bosse
Thank you very much. So the ETS is, of course, the most important tool, as I said before, not only to fight against climate change but also for our security. And I just hesitate to understand why people again and again cannot see the fact that we are so reliant on gas and oil from outside of Europe, and that this instrument, which is taking us out of that squeeze, should be maintained. I just cannot get it. And that is only from a security point of view.
So, businesses all over Europe have taken note of the ETS system. They have invested and geared their business models towards this system. So, if we deviate from this, which would be a catastrophe for many reasons that I just mentioned, that would also be very bad for our businesses. I gave you the numbers before. We are keeping up the pace with China on this transition, and we are overtaking what we, for many years, have thought of as our big brother, the US.
But in this case, it is actually not U. S. That is in the lead. It is China and Europe. So this transition actually fuels the whole innovation going on in the European Union today.
The ECS is a source of finance for member states, but it is obviously only a source of finance to keep up the transition, to make sure that there is money and funds. So nobody can say we do not have the funds. The funds are there. And then, of course, as we talked about earlier, it is also something where there is support for citizens, knowing well that this transition is expensive. Nobody ever said anything else.
It will be costly. The benefits, once we have completed the transition, are tremendous. And then I just want to understand, Mr. Knotek's comment, if I understand it correctly. I mean, stay in the sectors.
That would be against all common sense. The ETS system is for transition. It is for transforming sectors. So hopefully, I did not misunderstand you, but that is only to be clear here. Climate populism, that is a new and interesting word.
I have never heard that before. I can't see any glimpse of populism. This is painful. This is not popular. Everybody knows it's painful, but everybody also knows it's goddamn necessary.
My question to the commission is the following. How can we increase two things: transparency, so that we can showcase on a completely transparent level, country by country, sector by sector, how this is actually evolving? And then, second, communication. Let's be clear to all our citizens: all the benefits that are here for everybody, businesses and citizens, and let's not be taken over by ideas of climate populism or anything like that.
Lena Schilling
Thank you so much, Chair, and thank you, Commission, for the presentation. I will continue in German. Now.
I'm always very happy when I listen and can agree with Peter Lisa. So, I want to say this in our common language. I think it's very clear that the revision of the ETS is a good idea. It's good that member states are now using this for climate and social measures. And, as he pointed out, let me emphasize as well that it is not clear how the member states are using the money.
It's not transparent enough, and I don't think the reporting obligations go far enough. So, this raises a lot of questions. In the last legislative period, member states were asked to express their plans every five years for the use of these revenues, how this is going to function, what the investments are going to be, and who the focus groups are. And then these plans are going to be approved by the commission. But what does that mean right now? Between 2024 and 2030, they will be able to have €100,000,000,000, and they can then spend this because this is a question of decarbonization and transition.
These are strategic questions. These are long-term. You can't just say, every year, "How are we going to spend this money?" Rather, this is an enormous opportunity that has been provided to us by the ETS revision. So, I think we have to improve this.
And that's why, building on what my colleague in Toronto said in the current report on climate protection, some member states, for example Italy, are using 100% of their revenue. They've been moving it to future years and not using any of it currently for climate. So, how are they going to achieve their climate goals? Because that is not the idea behind the ETS. It's not the idea behind this notion of revenues.
So, the commission, what can you do to ensure that member states actually do not delay their investments and then simply carry over this use of revenues? We have to be better at this. And let me also point out that it is very clear that we are the ones who support the ETS. And yes, with other measures, a trading system is very important, but we see in many analyses that member states are not very transparent about how they're using this, and that's not how it's supposed to be. When things aren't working as they should, then we're losing at this.
So the question from the commission to the commission is: what are you going to do about the actions of the member states? How can we ensure that these revenues are used reasonably and intelligently for the member state?
Pierfrancesco Maran
And for the left, Lee Anderson. If there's somebody to catch the eye, we can tell us. Yeah.
Li Andersson
Thank you very much, Chair. I think, on a general note, in a general discussion, I just want to say that I come from a country where business has been very strongly in favor of the ETS system. Any kind of negative changes or changes to water down the system would actually be a punishment against industry, businesses, and companies that have adapted to the system the EU has chosen and have also made the necessary investment for the transition. So, it's very difficult for me to understand why you would want to send a signal like that to the businesses and industries. But coming to the topic at hand on the revenues, which are, of course, extremely important, they should be used to accelerate the transition into a low-carbon society.
And it's also important for the societal acceptance and understanding of the climate policy that we are implementing. And my main question would be, also referring to what the previous speaker was saying: what then happens when you don't have transparency and traceability regarding these funds? And I will use the same case example of Italy because there has been an analysis of reports submitted by Italy to the European Commission between 2014 and 2024. And they raised serious concerns. So, for example, between 2012 and 2024, EU ETS auctions generated $15,600,000,000 in revenue for Italy.
Yet, based on information contained in public reports, only around 9% of this amount appears to have been allocated to climate-related measures. And also, there is an issue with actual spending. So not all of the revenue has been spent either, especially in the 12 to 13 period. So, with the revised rules requiring 100% of the revenues to support climate action and the rest for social impacts, which is good, also referring to the discussion on the ETS two that we just had, improved public transparency is really essential. So, my question would be whether the Commission is aware of the issues raised by the analysis regarding Italy, and how the Commission then intends to ensure that, in cases where you do not have transparency and traceability, these principles will also be implemented.
Anja Arndt
I'll be speaking German. Thank you very much, Chair, dear colleagues. Let's be completely honest. The EU ETS is also often presented as a success story. However, for many citizens and companies in Europe, it feels completely different.
The ETS has actually become a gigantic redistribution mechanism. It makes energy more expensive. It makes production costs more expensive, and it destroys our industries in global competition. While European companies have to deal with higher CO2 prices, production is simply displaced outside of Europe, to places with lower environmental standards. And the result of the system is not fewer emissions, but actually more global emissions.
And you have been ignoring that for years. The member states are earning millions in revenue, billions in revenue from the auctions, and that has to end. Our opinion is clear. This system is damaging in terms of economics, social terms, and climate terms as well. The EU ETS doesn't really need to be discussed any further.
It should simply be completely abolished. So, if I'm going to ask a question today: if the ETS is really such a great success for the climate, economy, and citizens, why is there this increase in the displacement of industry? Why is there an increase in CO2 emissions and energy prices? And why is the social burden greater in Europe? Thank you.
Pierfrancesco Maran
Thank you. Now we open the catch-the-eye. I am the first to speak. My opinion is that we can't continue betting on importing gas from unstable countries. It's not just a matter of the environment, but also a matter of our freedom and autonomy.
And ETS is helping to emancipate us from that. The previous parliament did important work on rules regarding that, and I would mention the fact that the money should not be used, but shall be used. I don't think today we had sufficient information on where revenues are used, and this is fundamental for our decisions at a topical moment for ETS. We are talking about fixing ETS 1. Some national governments say we should abolish it.
We need to know how it is really going. We are talking about the previous debate, which was about ETS too. The use of resources is a very important part of ETS because it can support investment and the social acceptance of such an important and complicated topic. I think we need much information and many decisions from the commission, and I hope later we will have other numbers and information about it, because it is not just a mere idea that national governments should do something, but national member states are part of the process of reusing money that is from citizens in order to help this process. And the information we have from independent reports is not so optimistic that it's happening.
So I ask the commission if they can help us to have further information on the use of money because we need it to know exactly how ETS is going. Thank you. Now we move to Sean Kelly from the EPP.
Seán Kelly
Thank you very much, and thanks to the Commission for the presentation. I agree overall with the policy. Obviously, ETS is important. Decarbonization is very important. But I was somewhat surprised that for the vast majority of member states, the revenues from the ETS were going into the general budget.
In other words, it isn't going for decarbonization at all, possibly. And even when it was going to industry, it was not seen to be prioritizing decarbonization. And also, carbon leakage, which is a direct result of some of the messages we're trying to send, did not seem to be included either. So, my question for the commission is: how are they going to change that? And also, in relation to the general public, most people, let's say, have no clue what ETS is, and what can we do to change that, particularly to try to get the message across to them that ETS is good for business, good for the environment, and good for you.
That's the key point. There are just too many Eurosceptics and anti-Europeans out there who have a field day because we're not doing enough to promote it. And while the websites rightly say funded by the EU, I think we could tie this in with Ursula von der Leyen's campaign for Made in Europe. And I would ask the commission, would they consider doing public posturing and public advertising? It likes the bus stops and countrywide, showing the benefits of this ETS and also tying in with the overall policy of Europe.
Because citizens need to know that Europe is good for them. All they are hearing is the opposite. And I think there's an opportunity here to do it. Thank you very much.
Bruno Tobback
I want to start by agreeing remarkably with the honest assessment of the colleague from Patriots that the last elections have left this Parliament a bit short of common sense. And I want to bring some common sense to the discussion, which is, first of all, to point out that what is happening today, this week, and the last couple of days in the Middle East is, for those companies and sectors that are dependent on fossil fuels, many times more expensive than any total cost of the ETS right now. And then, on top of that, none of those billions of euros that we are spending extra because of the price spike on gas and oil is going to come back to European industry to help them do a transition and to use less of that oil; on the contrary. The common sense behind an ETS system is that indeed the sectors pay for their own transition; the old pays for the new. To do that and to evaluate it, you would need to have a clear view of the numbers: where the money goes, how much comes in, and indeed an honest assessment.
And when I look at what the commission presents, I think that even there, there is a bit of mystery and smoke and mirrors going on. Because when you look at the distribution of the money, as far as we can trace it, there is a separate category for indirect carbon leakage and cost compensation, which, if you put it in the graph, shows that we pay more to a lot of industries to keep emitting than we pay to do their industrial decarbonization. I'm not blaming the commission for that. But I do think that more transparency in the numbers is needed, and I hope they will provide them in response to this very clear question, so that when we get the numbers, we get them very transparently for every country where that money goes. And I would secondly be very interested to know if the Commission is willing to, in that case, maybe even initiate enforcement and infringement procedures to make sure that the money does indeed go to investing more in European independence and lower prices, rather than continuing the misery and dependence we are in right now every day. Thank you.
Jana Nagyová
I'd like to react to some of the colleagues or to most of the colleagues because, at first sight, it might look like we are on different points of view, on different sides. But when you look into the details, we all, from my perspective, want the same thing. We want a strong and independent Europe. We are just diverse in the way we get to the point. And now I'll try to, okay.
I'll continue in English. So, coming back to the ETS point. I do strongly believe that the original intention of ETS, how it was designed, was right. When looking at the revenues coming from the sale of emission allowances on the primary market, and this is the difference, in '24, they reached almost 40 billion euros. That's fine.
This is money which was received by the member states, the modernization fund, and the innovation funds. Great. Looks perfect. So far, so good. But here is the point.
According to the ESMA report from October 25, which is about EU carbon markets in 2025, the volume of allowances traded on the secondary markets in 2024 reached €644,000,000,000. So it means almost 25 more than in the primary markets. And the profits from this transaction do not end up in the public budgets. They end up in the pockets of financial institutions and speculators. And the ESMA report confirms that investment firms and banks dominated almost 63% of total business cases.
And this institution definitely does not invest only in climate measures, but they invest where they have bigger profit. So, to make it clear, 80% of all allowances from the auctions abide by the entities without a direct obligation, including financial companies, and 63% of the profit goes outside the EU. And this is something one doesn't have to be Einstein to understand: something is wrong in this whole system. So, what should we do with this? This is one question.
And the second small remark is, sorry for the time. But because, in general, we say the devil is in the details. And we know that even the money from the modernization fund, which is originally targeted to environmental measures, cannot go to the beneficiaries who need it the most because of restrictions from state aid rules, regulatory burdens, and very often administrative burdens as well. So, what should we do with this? Any idea?
Thank you.
Thank you.
Marie-Luce Brasier-Clain
Thank you very much, Chair. Thank you, Commission. Last month, several businesses and member states criticized the carbon market and the high cost. And what the commission is stating, that there's low revenue because of it, is true. When it comes to the late entry into force, we see that there are problems. Now, we know that the rules allow this to happen nonetheless.
What's important is for us to see the objectives that come from the Green Deal, which is out of date. The real problem is the existence of this carbon tax. It is a problem that means we can't act and that has a negative impact on our competitiveness in our households. What does the revenue pay for? Renewable energy to the detriment of our technological advances.
Tax revenue with an interest to keep high prices. We know that there are free allowances for several years, but the reduction and the lowering of the ceiling are going to automatically cause a price hike. Nonetheless, we see that businesses are spreading out their investment, but the EU regulation is not causing the shift transition that we need, even though it is more stringent. There's a necessary modernization of infrastructure. Therefore, we're going to have exorbitant energy prices that will prevent that from happening.
Therefore, we should look at the carbon market based on the increase in energy prices. At this rate, this will cause the closure of factories and the sending of businesses abroad because of the punitive regulatory regulations that are in force. Thank you.
Thank you. We go back to the commission.
Speaker 51
Yes. Thank you very much. So, thank you for the questions and the comments. Most questions were around data quality, transparency, and communication. And then, maybe to conclude, are the member states living up to their obligations?
I will address that first. And then there were some questions also on the Social Climate Fund implementation and the integrity of the EU ETS. So let me start with the data quality. I was mentioning in the presentation that we don't have all the data. So, I can say no.
It's actually not satisfactory. It's also complicated. Member states take several years to spend and report on how they use the revenue. The directive does not set a clear deadline, so we cannot impose one on them. But we do encourage them to spend the revenues they have been using over two years.
But not all member states are able to do so, and some are still spending the revenues from as far back as 2013. With a long time spent, it is a little bit difficult to have good quality data. What can we do? We have a dialogue with the member states. We have that regularly.
We have provided guidance and templates, updated them, and are trying to make them as current as possible. One thing that will increase transparency is, particularly if member states set aside the revenues in a specific fund, creating a ring-fencing in the budget of the revenues they receive. This makes it easier to trace where this money has been spent, but it also really increases transparency. So then, moving to the questions around transparency. We have only had the need to use 100% of the revenues on climate spending since 2024, and we only have the full data now in 2025.
So we are in the early days of being able to show full transparency of 100% of the spending. This is what we will have a deep dive into right now, and we will try to improve that over the summer. But it will be something that increases over the years. We will also look at how we are presenting the figures on our own websites and the EEA website. On the label, it is also fairly recent, introduced after the last revision.
We will also dig deeper into what has actually been used to the extent that it is possible for us. But again, here, there is no strong obligation. It's a rather soft obligation. So, it's difficult for the commission to take action against the member states if we find that there is inadequate labeling. On the communication side, I agree with honorable members that communication is very important regarding the benefits of the EU ETS for the climate transition, but equally important for industrial competitiveness and for the security that we are increasing by reducing our reliance on fossil fuels.
Europe's dependency on fossil fuels will really be reduced by the transition that ETS is helping. We can do some on the communication from the Commission side, but I will also say a lot of this is better done at member state level, at regional level, where it's possible to address the specificities of the citizens more locally. It's more difficult for European campaigns, but we can, of course, try and see what we can do. We also work on our own presentations, on the use of the revenues. On the Social Climate Fund implementation, there was a question about what the Commission is doing.
Here, we are in very close contact with all the member states to support them in the preparation of their social climate plans. Some of them are already approved. We have published best practices on how you can implement the Social Climate Fund and also the revenues from ETS 2. We have also set up a platform so member states have easier access to exchanging information and collaboration on how to learn from each other in the best way. There were 10 member states that used the Commission instrument for technical assistance to prepare for the Social Climate Fund.
It was very important and very good for the data analysis, in particular in identifying the vulnerable groups. We have also provided several guidelines on how to facilitate the preparation of the Social Climate Fund. And then there was also a question about the integrity of the ETS system. As the commission, we would strongly say that there is strong integrity in the EU ETS. It has been in place for 20 years and has enabled a 50% emissions reduction from the sectors covered.
We are well on track for our 62% reduction by 2030. We have the ESMA report every year on how the market is functioning. ESMA is concluding that it is a well-functioning market. Public consultation with companies and the compliance entities in the ETS also shows that the vast majority of compliance companies prefer to buy the allowances they need for compliance via their banks and financial institutions. The banks can reduce the administrative burden for companies.
They can also reduce the costs of holding allowances, as they don't have to hold them all the time; they can hedge and only buy them when they need them for compliance. The financial institutions and banks really provide that service to the compliance companies. And furthermore, they ensure that it's a liquid market, so the price is predictable. This is what the ESMO report is concluding and what the compliance companies have reported to us. So, I think that answers the questions.
Thank you.
Pierfrancesco Maran
Thank you. We move on to the next item. We will now proceed with the consideration of the draft opinion on the conditions for the implementation of the Union support to the Common Agriculture Policy for the period from 2028 to 2034. I give now the floor to the ENVI rapporteur, Mr. Shaun Kelley.
Seán Kelly
Thank you very much, Chair. Delighted to present my interim thoughts on this topic. So, before going any further, I must address the fundamental issue that we are facing: funding, or lack thereof. All the challenges we face in creating a cap that truly delivers for farmers and for the environment lead back to this. We need increased funding overall, and we need ring-fenced funding for environmental measures as a top priority, coming from outside the ring-fenced allocation for income support.
Farmers and foresters are expected to be the implementers of the majority of the EU's climate policies and ambitions, yet do we reward them fairly for this role? We cannot continue to expect farmers to deliver the EU's environmental ambitions without providing the necessary financial backing. At the same time, the Commission's new approach to the CAP, through the establishment of national regional partnership plans and the abolition of the two-pillar system, has created more financial uncertainty for farmers and for the environmental ambitions of the Union. The cuts to direct CAP budget allocations will not help sustainability. They will not attract young farmers to the sector.
They will not deliver a more attractive and predictable agri-food system. Predictability is critical. Farmers plan in years and decades, not in political cycles. If we undermine certainty, we undermine both sustainability and competitiveness. For this reason, I aim to ensure that the cap protects member states' ability to continue with our current suite of measures, meaning they do not have to start from square one developing new schemes and infrastructure.
We've all witnessed the farmers' protests across Europe and here on our doorstep over the last several years, and we have heard what the farmers have had to say. The task that lies before us here is to balance sustainability with competitiveness. No more red tape. We need a simplified CAP that truly makes the lives of farmers easier, for instance, by ensuring small farmers can access eco schemes without requiring them to complete a mountain of paperwork. This is why I've suggested the introduction of a comparative system and additional administrative obligations for beneficiaries against existing obligations.
I also want to ensure stronger support for investment in innovation and digital tools that improve farm management and reduce workload. Precision farming techniques, data-driven nutrient management, and other digital technologies can deliver real environmental benefits while maintaining productivity. Digitalization will be crucial to the future of EU farming if we want to remain competitive globally. Support for innovation is, in my view, one of the key ways to reconcile productivity, sustainability, and competitiveness while enabling broader transitions in farming systems. If we invest wisely in technology and knowledge transfer, we can reduce emissions, improve biodiversity outcomes, and enhance farm incomes at the same time.
Working under a tight timeline, I decided to submit a preliminary proposal for this file, and I'm looking forward to contributing more when the amendments open. Finally, colleagues, I speak from experience when I say that I know it is a difficult task to separate the envy competencies from the agri competencies in this file. But I encourage you to try to keep your amendments within the scope of this opinion, and we will do our best to find the best compromises possible. Thank you very much.
Pierfrancesco Maran
Thank you. We move to the Shadow Report for S and D, Sarkis Anotoglu. Thank you.
Sakis Arnaoutoglou
You. Thank you, Chair. I should like to start by thanking the rapporteur, Kelly, for all his work and for maintaining this opinion as a very constructive one. For us, the CAP is mostly a social contract. This is not just farmers for farmers, not just an issue that is being debated in Brussels, but whether their income will continue to exist.
The farmers are under pressure from the food chain, from climate change, and from their costs, while workers are precariously employed. We also need to protect nature, which protects humans. But if we want farmers to protect nature, we need to make sure that they are able to live in dignity based on their income. They ensure many benefits for the people. This document sets certain priorities, such as water quality and many others, but the NV Committee should insist.
Thank you, Chair. The committee needs to insist that this be accompanied by funding and support so that the vulnerable farms do not lag behind. Public funds should better reward public goods. Farmers are asking for a fair reward for their services, and that is why we believe that a bigger share of the CAP should be spent on ecological actions. And the actions should, through the capping system, reach small farmers and maintain employment in rural areas.
We need a CAP that will allow young people to have access to farming and consulting services and assistance, including practical assistance such as help on the farm. We need to focus on areas that are under huge demographic pressure, where people are becoming older and there is a risk of desertification. We also need to look at reality honestly. Farmers are under pressure from climate phenomena and the market situation. They should not remain the poor relative of the CAP.
We need to have more accessible means, better mutual funds and insurance, and better income support wherever possible. And we need to have a swift crisis management system for all farms. Finally, and very importantly, the new horizontal framework should not allow undermining the climate ambition through flexible plans. We can support flexibility, but not deregulation to the detriment of the climate, biodiversity, animal welfare, and environmental practices on the farm. We therefore, if we need a European farming sector that will be productive, protect nature, and put this at the forefront, need to protect this.
Thank you very much.
I will speak Polish.
Anna Zalewska
Thank you very much. Now, I am speaking on behalf of a colleague who could not be present. I would like to say to the colleagues that I would like to appeal to you. You should be very much aware that this is a historical opportunity. Perhaps it's the last opportunity to make a decision about the CAP with our votes.
I think we should really limit these ideas of the commission when you're talking about the impact on the member states. We can see from the negotiations that the member states are agreeing to very poor compromises. This is really our last chance, and I think recent years have demonstrated that the European Commission is moving in a direction where we won't have any guaranteed farming and agriculture. And we're talking about the food security of Europe being jeopardized, with the war in Ukraine and what is now happening in the Middle East. And so that means that we're really frightened, and that's the first point.
Now, the second point I'd like to make is that the commission is consistently destroying the European agriculture sector because they are making agreements with Ukraine and with Macrosor. And in that case, the environment is not playing any role at all. You should not be lying about various guarantees because, honestly, these standards are supposed to be mirror standards, allegedly, but Makassar and Ukraine are supposed to have exactly the same standards. That's simply not true, and it has nothing to do with the small farmers in those countries. There are no small farmers in these countries.
There, they have these huge oligarchs who manage agriculture. So I think you have to take this very seriously, and we're talking about the budget. The budget is not sufficient by any means to face such a global challenge. Mine is 30%. That is really suicidal for European agriculture.
And we also have to mention that European agriculture is not always profitable. Everything that's renewable has to be expensive because in Western Europe, they don't really know what's going to happen with all of these wind turbines. People simply don't want renewable energy in their backyard. And for that, in Central and Eastern Europe, we need regions where you can place these wind turbines. And, of course, farmers can rent out their land if they want to have some income.
This is a huge challenge that they're facing, and I think we, as the European Parliament, have to be ready for these challenges.
Sigrid Friis
Thank you, Chair, and thank you.
You to the Raboteau, Mr. Kelly, thank you for presenting your draft opinion. Let me be very clear from the beginning. I'm deeply disappointed by the commission's proposal. We're living through a climate crisis, a biodiversity crisis, and a pollution crisis.
Agriculture is not the only cause, but it is a major contributor. The sector accounts for around 10% of the EU's greenhouse gas emissions. We see nitrate and pesticide pollution in our water. We see declining biodiversity in our landscapes and real consequences for public health. And we still struggle with serious animal welfare concerns.
With this reform, the Commission had a historic opportunity to align our agricultural spending with our environmental and climate objectives. Instead, we are presented with a proposal that fundamentally reshapes the CAP in a way that actually risks backtracking on sustainability. I really appreciate that the Rapporteur is trying to strengthen the environmental dimension, and we need to go further. That's why I want to introduce a clear EU ring-fenced budget for climate and the environment, so that we guarantee real delivery. We need stronger safeguards to avoid a race to the bottom between member states, and we must create real incentives to help farmers succeed in the green transition, especially in the livestock sector.
I think we should also address our structural protein dependency. Today, around two-thirds of our protein feed is imported, mainly from Brazil. This is neither sustainable nor very strategic. Boosting European plant-based protein production is about resilience, strategic autonomy, better public health, and lower environmental pressure. It's a win for the farmers, and it's a win for Europe.
We must clearly ask farmers to deliver on climate, nature, and food security, and we should be the ones creating the subsidy system that rewards those who actually do. Thank you.
Pär Holmgren
Thank you very much, Cher, and thank you, Shaun Kelley, for your draft report. And to colleagues, not least Sigrid, who just spoke, I could echo all of your arguments once again. And I have said this before many times in this chamber. It cannot be stressed enough. Farmers are at the forefront of battling climate change.
Each year, we are presented with new reports of record-breaking heat waves, droughts, floods, and extreme weather that lead to forest fires, crop failure, emergency slaughter, and, in the end, closure of farms. So, climate change is seriously threatening our food security. And as we probably all understand in this chamber, this will only get worse in the next years and decades ahead of us. And then, on top of climate change, we have an aging farmers' workforce and high barriers to entry for young and new farmers. We have input dependence at both the farm and union levels.
And we also have declining biodiversity and degrading soil health across Europe. So, from my perspective, the next CAP, first of all, must secure ring-fenced funding for climate change adaptation, protection of our soils, and the reduction of input dependence. We shouldn't and cannot leave this for farmers to finance on their own. We hear that the policy should shift towards incentives, sure, but we must also finance this. Number two, we must ensure that young and new farmers have a fair chance to start their businesses through a fair distribution of public funds and dedicated advisory services.
This issue is structural, and it must be addressed accordingly. And finally, third, the EU's common agricultural policy must remain common. Our food security will not benefit from the nationalization of agricultural policy. No farmer wants to produce on an EU market with 27 different standards and subsidy systems, which will distort the market. So, I'm really looking forward to working with all of you and hope that we can constructively send a strong, enviable message to my other colleagues in the agri committee who may not be as constructive and ambitious as I hope we will be together.
Thank you very much.
Sebastian Everding
Thank you, Chair. I will continue in German. Dear,
Colleagues, when we're talking about the future of the CAP, we have to face two realities. Firstly, the ecological borders of our planet and the crisis from which the agriculture sector is suffering. We've had this: we have only a very small percentage of farmers who are actually younger than 40. We have 260 holdings in Germany, and only 7%, or under 35 years of age. We need a change of generation, and that's an opportunity because young farmers are much more in favor of innovation.
They're open to innovation, digital technologies, and the sustainability of production. And if we talk about the sustainability of production, that also means that we have to look honestly at the impact of animal farming. There are 9,000,000 enterprise holdings in Europe, and 48% are focused on plants, while 22% are on animal husbandry. However, it is the smaller sector, this 22%, which is responsible for the vast majority of environmental impact, primarily because of slurry. So, it's very important that we do not ignore the impact of animal husbandry holdings.
Animal production has a disproportionately large footprint on the environment in the EU. And that's why, when we distribute the money of the CAP, public money, we have to really support environmentally friendly agriculture. In other words, producing plants and plant proteins. Those holdings that decide to switch from animal production to plant production should be supported. So it's important that the LIFE program, which is the only one exclusively focused on the environment and biodiversity of these finance instruments, has to be an independent program with its own budget.
It has to continue with its own budget line. Only in this way can we ensure climate protection and biodiversity in the future. And in the future, animal welfare has to really play a central role in the policies, because citizens rightly expect a very high level of protection for animals. And if you have, and we have to really ensure that the conditions for animals are improved in a long-term way. And when we're talking about plant proteins, we have to say, well, can we reduce the environmental impact, especially the environmental impact of animal production?
So, our farmers and our food system have to be ready for the future. I know many people here in the parliament really want to keep the status quo at any cost, but we have to be more sustainable. We have to be more ethical, and we have to have more innovation. Thank you very much.
Pierfrancesco Maran
Thank you. Now we move to the commission, Mr. Silthius, director of DG AG.
Speaker 87
Thank you. Thank you very much. Rapporteur Kelly, thank you very much, honorable members. Chairman, I am happy to be able to engage in this debate. I think, given the points made, it's good to frame the proposal for the next common agriculture policy a bit more broadly.
As you know, it's part of this new larger fund, the NRPP, governed by the National Regional Partnership Plan. And I think it's important to stress that there is a minimum ring-fenced budget for the Common Agricultural Policy in that context, which is securing close to 300,000,000,000 for the agricultural policy in the future. And this is a minimum budget because the whole philosophy of this new fund is that synergies are possible and that member states can program more for agriculture in rural areas. And in fact, the commission has already suggested to Parliament and Council in a letter in November that 10% of the non-ring-fenced parts go to rural areas. In addition, in January, the Commission also suggested that a considerable sum from the flexibility reserve could already be programmed for agriculture as of 2028.
Speaker 88
In other words, all these elements provide a very meaningful additional financial input for agriculture, meaning that the budget is relatively stable compared to today. So I think with the proposal and the additional elements, we are looking at an agricultural budget for the next programming period, which is very substantial and can help us address all the challenges that have been identified. In the end, what we need is an agricultural sector that is attractive, competitive, works hand in hand with nature, ensures vibrant rural areas, and does so in a way that is also simple to implement. And that's why I think within this new single fund, we have really tried, and I think we have succeeded in making sure that the tools of the common agriculture policy, the tools that are there for the farmers and the management systems can largely be continued, so that there is a lot of administrative continuation for both member state administrations and farmers. And that is also important, to keep the policy consistent.
Speaker 87
This we are talking about a common agricultural policy. So within a single fund, it's really important to identify measures, tools, and provisions that ensure this policy is implemented in a common way. And precisely, the regulation that is on your table today is the regulation in which we try to establish those common rules. Please allow me to address three themes that I think are quite important for the debate that you will continue to have among yourselves, with the commission, and, of course, also with the member states. One is, I think, the discussion around income support.
We are keen to make sure that we have an attractive agricultural sector. Rapporteur Kelly, you have rightly mentioned that generational renewal is one of the key challenges. The commission has recently also published a strategy in this area, but we believe that direct income support will need to remain a key feature of the common agricultural policy, with changes differentiating payments to those who need it most, including young farmers. Also, making sure that payments are digressive and capped. Digressive from €20,000, capped at €100,000.
It is very important to make sure that we really spend that income support on those who need it most. And then we have additional tools for areas with natural constraints, support for couples, coupled to certain sectors, including the protein sector, which was addressed this morning. It is very important, with a dedicated program for small farmers, which is really important given the number of small farmers, and they need a specific simplified scheme. The second point I wanted to address is on investments. The rapporteur has rightly underlined the need for innovation, precision farming, and digital tools as key for future development. And with the focus on investments in this fund, but also the synergies and the wider national and regional partnership plans, we believe we can really support the agricultural sector in benefiting from those innovations that are out there and being discussed.
And that is also key for the third theme that I would like to address, which is green architecture, a technical term to talk about how we support the sustainability of farming and the public goods of farming. And here, we are really building on the current experience of the Common Agricultural Policy, as well as on the vision of agriculture and food. We see that, despite the investments, there is an intensification of agricultural activity in some areas, which is a challenge for the management of natural resources and environmental quality, but also a worrying retreat of grassland-based livestock farming in other areas, leading to, for example, the abandonment of land. So, we really need to invest in that with public money. So that's why we propose a continuation of the current tools to do that, but simpler and also, to some extent, expanded with a focus on the term "incentive."
We want to incentivize farmers to do that, to go the extra mile. We have identified several environmental climate priority areas. In the NRP, we have set a 43% budget target for environment and climate. We have simplified what is currently called conditionality. We call it farm stewardship in the future, with maintenance of all the statutory management requirements that are there today if you wish to receive CAP funding and also social conditionality.
And we have further simplified protective practices, practices that farmers need to implement to receive the CAP budget payments. And then there is an additional novelty: a transition payment for those farmers wanting to or needing to transition to a different kind of farming. So we've also included novelties in the way we want to propose financing the sustainability of farming in the future. Chairman, I think I will leave my comments with that, but I hope that the overall picture of a CAP, which is part of a larger fund, benefits and enables the CAP and the farming sector of Europe to benefit from the synergies of this fund while maintaining some of the key features of the Common Agricultural Policy that we have today, which we believe we need to maintain: direct public support for sustainable farming and investment support for the future. Thank you.
Thank you. We go.
Back to the report.
Seán Kelly
Thank you very much, Mr. Chair, and thanks to all colleagues for their very positive and constructive comments, which are very encouraging, and also to the Commission, who I think are on the same track as us. So, if we all move in this direction and ensure that the environment is protected, and at the same time ensure the economic viability of farms, which in turn will guarantee the economic viability of rural areas and their way of life, which is hugely important, I think we can make a massive contribution because the next CAP is going to have ramifications long beyond the seven-year period that it will be there for. So, we do need a solid and vibrant cap now more than ever. And, particularly, the ring-fenced funding exclusively for measures for the environment is going to be absolutely key. I think farmers are eager to contribute.
They get great satisfaction when they know that they are reducing emissions, contributing to nature restoration, or whatever. And I think that's something we should appreciate and reward more. I think they can deliver and will deliver a lot more, but it's absolutely crucial not only from the point of view of funding, but also to get rid of the excessive red tape that member states add to schemes which might be starting here in Brussels. And I think I agree with the commission. We should look at a common way.
I don't see any reason why there should be additional burdens on farmers in Ireland, as opposed, Bill said, to Germany or France, in relation to some scheme or other that is there to help improve the environment. So there has to be a sign-off from, I would say, the commission for any schemes that are introduced. Particularly, some of them are totally impractical. I've seen ones in Ireland where farmers wanted to join the scheme. And because of the nonsense—complete and utter nonsense—especially in things like forestry, specifications have made no sense.
They simply didn't bother. So, we have to look at incentivizing. That's the word which the commission used, and I think that's the key. Incentivize, reward, ring-fence, and we can deliver for agriculture, for nature, and for the environment. So, let's work together to ensure that happens.
Thank you very much.
Pierfrancesco Maran
Thank you. The deadline for amendments is March 19 at 11 p.m. The voting event will be on 07/02/2026. The voting is on 12/01/2026, and the voting planner is supposed to be in January 2027. And our next meeting will be on March 24.
Thank you, and have a nice day.
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