EU lawmakers clinch compromises on carbon market overhaul

By Kate Abnett

BRUSSELS (Reuters) - European Union lawmakers have reached initial agreements on reforms to the EU carbon market, as they prepare to negotiate an overhaul of the 27-country bloc's core policy for reducing planet-warming emissions.

Lawmakers representing a broad majority in the European Parliament's environment committee, backed most of the changes, the legislature's lead negotiator Peter Liese said on Wednesday.

The changes would scale back a planned new carbon market to impose CO2 costs on suppliers of the fuels used in buildings and transport. The lawmakers agreed to apply the scheme to commercial entities from 2025, and only extend it to private consumers in 2029 if certain conditions are met.

Prices in the scheme would be capped at 50 euros ($52.82) per tonne, he said.

Liese said the deal to leave households out of the new market was a "painful compromise" but that he considered it a win, in light of the opposition from some countries and lawmakers to introducing the scheme at all.

Parliament's environment committee will vote on the proposed changes next week, before a full parliament vote in June or July. If approved, the deal will form parliament's position for final negotiations with EU countries on the reforms.

Change is also coming to the EU's current carbon market, the EU Emissions Trading System (ETS), its core climate policy, which forces power plants and factories to buy CO2 permits when they pollute and caps the supply of permits.

Prices under that scheme are currently around 85 euros a tonne.

The lawmakers agreed to make it easier to respond to price spikes in the carbon market and reward industrial companies with the best environmental performance by giving them extra free permits, taken from firms without a plan to decarbonise.

Emissions from shipping would be fully covered by the carbon market from 2024, two years earlier than the original proposal by the European Commission, which drafts EU laws.

However, lawmakers could not agree on all elements. Some parliamentary groups agreed to push for even tougher rules - including an end to free CO2 permits for industry by the end of the decade.

EU lawmaker Michael Bloss, negotiator for the Greens, said the tougher proposals would cut carbon market emissions 67% by 2030, compared with the 61% cut under the Commission's proposal.

Groups backing the tougher rules may struggle to win majority support in the full parliament, however - setting up a messy few months of haggling over lawmakers' final position.

($1 = 0.9466 euros)

(Reporting by Kate Abnett; editing by Nina Chestney and Emelia Sithole-Matarise)