The European Parliament is the European Union's law-making body, directly elected by EU citizens every five years. It plays a decisive role in shaping the EU's climate and financial legislation, including the rules that govern the carbon market and assets like EUAs.
The European Parliament is the legislative branch of the European Union and the only one of its institutions whose members are directly elected by the citizens of the member states. It functions as a co-legislator, sharing the power to adopt and amend European laws and decide on the EU budget with the Council of the European Union. For investors in the climate-finance space, understanding the Parliament's role is crucial, as its decisions directly influence the regulatory landscape for environmental assets.
The Parliament's work is essential for democratic accountability within the EU. It represents the people's interests in EU decision-making and ensures that other EU institutions are working democratically.
Its core functions can be broken down into three main areas:
- Legislative Power: The Parliament scrutinizes, amends, and votes on legislative proposals from the European Commission. For a law to be passed—such as the reform of the EU Emissions Trading System (EU ETS)—it generally requires the approval of both the Parliament and the Council of the European Union.
- Budgetary Power: Alongside the Council, the Parliament establishes the EU's annual budget. This includes allocating funds to key initiatives like the European Green Deal, which finances the transition to a low-carbon economy.
- Supervisory Power: It exercises democratic oversight over all other EU institutions, most notably the European Commission. The Parliament can approve or reject the nomination of commissioners and has the power to vote a motion of censure, requiring the Commission to resign.
Concrete Examples in the Climate & Finance Space
1. Reforming the EU Emissions Trading System (EU ETS): The Parliament played a central role in negotiating and approving the “Fit for 55” package. Its members debated and voted on critical aspects of the EU ETS reform, such as accelerating the reduction of the emissions cap. This decision directly increases the scarcity of European Union Allowances (EUAs) over time, impacting their market value and the core of Homaio's investment offering.
2. Approving the Carbon Border Adjustment Mechanism (CBAM): The Parliament was instrumental in shaping and passing the CBAM law. This mechanism imposes a carbon price on certain goods imported into the EU, preventing “carbon leakage” and encouraging global partners to adopt stronger climate policies. This strengthens the EU's internal carbon market and demonstrates the Parliament's influence on global trade and climate policy.
For further details on the system that the Parliament regulates, [learn more about the EU Emissions Trading System (EU ETS)]. The official functions and news are available on the [official European Parliament website].