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On 18 April, the European Parliament approved three important draft EU laws related to climate change in the Fitfor55 2030 climate package, including the reform of the EU Emissions Trading System (EUETS), the revision of the Carbon Border Adjustment Mechanism (CBAM) rules and the establishment of a social climate fund. The bill, which is considered by the international community to be the EU's "biggest carbon market reform in history", will take effect only after being approved by the European Parliament and confirmed by the European Council.

The "Fitfor55" plan will be unveiled in 2021. It will put forward a series of 12 measures including energy, industry, transport and buildings, and commit Europe to reducing greenhouse gas emissions by 55% by the end of 2030 compared with 1990. Among them, the EU emissions trading system, which follows the "polluter pays" principle, is the core of European climate policy and the key to achieving the EU's goal of climate neutrality.

The bill raises the target that by 2030 EUETS sectors must cut greenhouse gas emissions by 62 per cent from 2005 levels, one percentage point more than the target previously proposed by the European Commission. There are also plans to phase out free carbon credits between 2026 and 2034, and create separate new ETSII programmes for road transport and building fuels, which will pay for greenhouse gas emissions as soon as 2027. If energy prices are high by then, implementation could be pushed back to 2028.

On March 14th the European Parliament passed a bill extending the carbon-market reserve system to 2030. Under the bill, companies in the EU's carbon trading system will be able to buy allowances to meet their emissions, or sell surplus allowances to the market if they meet emissions reduction targets. In fact, in order to keep the supply and demand of carbon allowances balanced, the European Commission has implemented the carbon market stabilization reserve mechanism since 2019. It also requires member states to ensure that total emissions do not exceed their annual carbon allotment. Only a month later, however, Europe decided to phase out its free carbon credits.

This time, the European Parliament revised the EU carbon border adjustment mechanism related draft rules, and passed. This means that the world's first carbon import tax will soon be implemented, and CBAM has become the world's first carbon tariff mechanism to address global climate change. The goods covered by CBAM include iron, steel, cement, aluminium, fertiliser, electricity, hydrogen and indirect emissions under certain conditions, according to a European Parliament announcement. Importers of these goods pay the difference between the carbon price in the producing country and the price of carbon allowances in the EU's emissions trading system.

According to the Huasheng Green Industry Development Institute, the implementation of the EU carbon tariff will increase the cost of relevant Chinese enterprises exporting to the EU by 6%-8%. The plan announced by the European Parliament to set up the EU Social Climate Fund (SCF) in 2026 will have little impact on China and other countries outside the EU. The main purpose is to ensure fair and inclusive climate transition in EU countries. When fully implemented, the SCF will raise up to 65 billion euros through auctions of ETSII quotas, with a further 25 percent paid by individual member states, for an estimated total of 86.7 billion euros. Vulnerable households, small and micro businesses and transport users affected by a lack of energy and transport resources will benefit.

Experts believe that the above act of the EU will have an impact on the global industrial chain, further change the division of labor in global trade, and bring challenges to China, but the impact is limited. In fact, under the influence of the EU carbon emission trading system, the development of China's carbon market has also been positively influenced. First of all, the stability and development of the EU carbon market has promoted the establishment of China's carbon market. In recent years, China has introduced a series of carbon emission management policies and started to promote carbon emission trading market to further promote carbon reduction work. Secondly, the institutional design and management experience of the EU carbon market can be used as a reference for China's carbon market construction. The EU emissions trading System was established through consultation among EU member states. It takes into account the actual situation of each member state and the interests of specific sectors, and has a moderate degree of flexibility. It also provides a reference for the construction of China's carbon market.