EU's biggest political group seeks to ease carbon market burden on industry, draft shows

By Kate Abnett

BRUSSELS, July 7 (Reuters) - The European Parliament's biggest political group wants to ease pressure on companies from the EU's flagship carbon market by slowing planned emissions cuts and extending free pollution permits, according to a draft position paper seen by Reuters.

The European Union is preparing to overhaul its Emissions Trading System (ETS), which requires power producers and industrial companies to buy permits to cover their carbon emissions.

The European Commission is due to propose changes to the ETS on July 17 and faces competing calls from governments over whether to weaken the scheme to help struggling industries.

The European People's Party — the biggest lawmaker group in the European Parliament, which alongside EU member states will negotiate the final ETS rules — said in a draft internal paper seen by Reuters that "adjustments are needed to safeguard industrial competitiveness".

The EPP, which also includes European Commission President Ursula von der Leyen's political party, wants to slow the pace at which emissions are cut under the ETS from 2030.

The system is currently designed to reduce emissions by at least 4.3% per year, rising to 4.4% from 2028. The annual reduction rate should be at least one percentage point lower from 2031 to 2035, and lower still after 2035, the draft paper said.

The group also wants industries to receive free carbon permits for longer, according to the draft document, which has not been published and could still change.

The EU currently grants industries a fixed number of free permits to help them compete with foreign rivals that do not face comparable carbon costs.

"The trajectory should be slowed down and pushed further back in time with a maximum phase-out of 30% before 2030," the draft said.

It added that if other EU measures designed to shield domestic producers from cheaper, carbon-intensive imports fail to work as intended, the phase-out of free permits should be halted.

Since 2013, the ETS has raised €260 billion ($297 billion) in revenue, most of which has gone to national governments. The draft said governments should invest a greater share of those proceeds in decarbonising their economies, particularly industries that bear carbon costs.

An EPP spokesperson declined to comment on the draft document.

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(Reporting by Kate Abnett. Editing by Mark Potter)