STRASBOURG: The European Parliament holds its final vote on Tuesday on whether to approve sweeping reforms to make EU climate change policies more ambitious, including an upgrade of the bloc’s carbon market.

Europe’s carbon market forces power plants and factories to buy CO2 permits when they pollute.

It has slashed those sectors’ emissions by 43% since 2005, but is facing a revamp to hit more ambitious EU climate change targets.

Parliament will vote on a deal agreed last year by negotiators from EU countries and Parliament, to reform the carbon market to cut emissions by 62% from 2005 levels by 2030.

Under the upgrade, factories will gradually lose the free CO2 permits they currently receive by 2034. The measures will also force ships to start paying for their emissions from 2024.

Lawmakers will also vote on the EU’s world-first plan to impose CO2 levies on imported goods including steel and cement from 2026, a policy designed to put European and foreign firms on a level footing.

The laws still need final approval from EU countries, who will assess them in the next few weeks, before they enter into force.

That approval is usually a formality that waves through pre-agreed deals with no changes - but the process has been called into question after Germany lodged last-minute opposition to another policy to phase out fossil fuel-powered cars.

Peter Liese, Parliament’s lead negotiator on the carbon market reform, said the policy would deliver approximately 25 times more CO2 savings this decade than the EU’s car CO2 emission limits.

“For the climate, the ETS alone is more important than all the other files together,” he told Reuters.

Liese said he expected Parliament to approve the reform with majority support.

The price of EU carbon permits has soared in recent years, boosted by anticipation of the reforms.

Carbon market revenues are returned to EU country governments to invest in climate measures.

The benchmark EU carbon price was trading at around 93 euros per tonne of CO2 on Monday, having nearly quadrupled since the start of 2020.

It hit 100 euros per tonne for the first time in February.

The EU will also launch a new carbon market covering suppliers of fuels used in cars and buildings in 2027, plus a 86.7 billion-euro EU fund to help consumers cope with the costs.