The European Union struck a deal today to overhaul Europe's carbon market after 2021, a key step toward meeting its pledges to cut greenhouse gases under the Paris climate agreement.
The European Parliament and the member states reached a tentative agreement to reform the world's biggest carbon market, but environmental activists said it does not go far enough.
Members must still formally approve the agreement.
"Today's landmark deal demonstrates that the European Union is turning its Paris commitment and ambition into concrete action," European Union EU Climate and Energy Commissioner Miguel Arias Canete said in a statement.
The EU Emissions Trading System puts a cap on the amount of carbon dioxide allowed to be emitted by large factories and other companies.
The firms can trade in quotas of these emissions -- the idea being to provide a carrot to improve energy efficiency or switch to cleaner sources so that they keep within the ceiling.
However, critics said the carbon market, which covers about 40 per cent of Europe's industrial emissions, has proven ineffective.
Carbon allowances were too generous, resulting in a carbon price too low to encourage savings.
Members of the European Parliament had pushed for more ambitious changes than those proposed by the commission, the executive arm of the 28-nation EU.
The commission said it accepted "significant changes" to the system in order to speed up emissions reductions and strengthen the Market Stability Reserve.
The MSR is designed to help ensure that carbon dioxide prices spur innovation in the field of energy efficiency.
The moves aim to reduce the oversupply of allowances on the carbon market.
The commission also agreed to new safeguards for European industry if needed to to reduce the risk of carbon leakage.
It also backed ways to help the industry and power sectors make the needed innovations and investments to transition to a low-carbon economy.
The WWF activist group said the deal makes the EU's pledges to the Paris climate pact "look meaningless" by paying polluters to continue pollluting.
The WWF's Sam Van den plas said it was "a relief" for the EU to lower the supply of ETS allowances but regretted it will take "at least five more years" to take effect.
Lobby group BusinessEurope said the deal was a step in the right direction but suspected the free allowances distributed were too low to prevent carbon leaks.
Under the Paris climate deal, the EU plans to cut greenhouse gas emissions by 40 per cent by 2030, compared against 1990 levels and make renewable energy account for 27 per cent of energy use.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)