A draft resolution drawn up by 13 MEPs and including several GLOBE EU members, which opposed a list of sectors put forward by the European Commission to be eligible for free CO2 allowances under the EU ETS (Emission Trading Scheme), was rejected last week by the Environment Committee. 39 MEPs voted against the resolution with 19 in favour and one abstention, in a move which will mean that those industries identified by the Commission and the Council as being at greatest risk of carbon leakage could get up to 100% of their emission allowances for free.

The threat of carbon leakage has prompted the EU to move to protect its industries, with fears that they will move abroad, if emission reduction targets are tougher in the EU than abroad. As a result the Commission proposed a list of 164 sectors and sub-sectors which it deemed to be most at threat, which include plastics, chemicals, food processing and steel industries, to be exempted from the ETS.

In effect this will mean that until an international agreement is reached, the chosen sectors will receive 100% of their emission allowances free. Once such a deal has been concluded, these sectors will receive 80% free until 2013, decreasing to 30% in 2020 and finally 0% in 2027.

The European Parliament had one opportunity to oppose the Commission proposal under the so-called "Regulatory procedure with scrutiny" process, provided it did so before December 23, 2009, however the failure to adopt the resolution means that this avenue is now closed.