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EU lights slow-burning fire under carbon prices

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A flame burning natural gas is seen at the Joint stock company "Mozyr oil refinery" near the town of Mozyr, Belarus January 4, 2020.

LONDON, July 14 (Reuters Breakingviews) - The European Union has put its industrial sector on notice. The European Commission on Wednesday unveiled its “Fit for 55” plan to cut the bloc’s output of greenhouse gases by 55% by 2030. It will extend the EU’s emissions trading system to include cars and buildings, and make industrial companies pay for permits instead of getting them for free. That will increase the proportion of emissions covered by tradeable permits from around a fifth to two-thirds, according to the Institute for European Environmental Policy. It should also push up the price of European carbon permits from their current 53 euros a tonne.

Not right now, though. On Wednesday, carbon prices hardly budged, probably because the EU allowed industrial companies subject to its new carbon border levy read more to keep trousering free allocations until 2035. Still, the new package updates the scope for taxation on miscreant sectors like aviation. The upward direction for carbon prices – and the costs for companies that don’t cut emissions - is clear. (By George Hay)

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Editing by Peter Thal Larsen and Karen Kwok

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