The EU approved a large-scale Reform of the Carbon Emissions Market - Bulgaria Abstained

European Union countries on Tuesday finally approved the biggest-ever reform of Europe's carbon emissions market, which will make pollution more expensive and strengthen the 27-member bloc's main tool for reducing carbon dioxide emissions, Reuters reported.

The world's first major carbon trading system since 2005 forces power plants and factories to buy permits when they emit carbon dioxide and has reduced emissions from those sectors by 43%.

European Union members endorsed a deal agreed last year by negotiators from EU countries and the European Parliament to reform the carbon market to cut emissions by 62% from 2005 levels by 2030.

After nearly two years of EU negotiations, member states' approval now means the policy will become law. The European Parliament approved the deal last week.

"Of the 27 countries in the EU, 23 voted for the reform. Poland and Hungary were against, and Belgium and Bulgaria abstained." Poland, which has previously called for the carbon market to be suspended or its price capped to ease the burden on industry, said EU climate policies set unrealistic targets.

The reform aims to increase pollution costs for sectors including cement production, aviation and shipping, while raising billions of euros by selling carbon dioxide permits for national governments to invest in green measures.

Heavy industries will lose the free CO2 permits they currently receive by 2034, while airlines will lose theirs from 2026, exposing them to higher carbon costs. Emissions from ships will be added to the scheme from 2024.

The countries also approved a world-first EU policy to phase in a tax on imports of high-carbon goods from 2026, targeting steel, cement, aluminum, fertilizers, electricity and hydrogen.

The carbon border tax aims to put EU industries and foreign competitors on a level playing field to avoid the relocation of EU producers to regions with less stringent environmental rules.

The price of EU carbon dioxide permits has soared in recent years, boosted by anticipation of the reforms. Permits were trading at around €88 a tonne on Tuesday, having more than tripled in value since the start of 2020.

EU countries also backed plans to launch a new EU carbon market covering emissions from fuels used in cars and buildings in 2027, plus an €86.7bn fund to support cost-hit consumers.

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