The European Council is the EU institution that defines the overall political direction and priorities of the European Union, bringing together the heads of state or government. It plays a pivotal role in setting the EU's long-term climate ambitions, which directly shapes the framework for the carbon market and influences the value of assets like [European Union Allowances (EUAs)].
The European Council stands at the apex of the European Union's institutional structure, acting as its primary strategic body. It comprises the heads of state or government of the 27 EU member countries, alongside the President of the European Council and the President of the European Commission. Its main function is not to pass laws, but to set the EU's overarching policy agenda and provide the necessary impetus for major initiatives, particularly on complex, long-term issues like climate change, economic strategy, and foreign policy.
The conclusions reached during its summits (held at least four times a year) are powerful political signals that guide the legislative and executive work of the other EU institutions. For investors in the climate finance space, the European Council's decisions are of paramount importance as they establish the ambition and long-term stability of environmental regulations like the EU Emissions Trading System (EU ETS).
Key Functions and Responsibilities
- Setting the Strategic Agenda: The Council defines the EU's priorities, as it did with the European Green Deal, committing the Union to climate neutrality by 2050.
- Responding to Crises: It is the key forum for coordinating responses to major crises, whether economic (like the 2008 financial crisis) or geopolitical.
- Foreign Policy Leadership: It defines the principles and general guidelines for the EU's Common Foreign and Security Policy (CFSP).
- Key Appointments: It nominates and appoints candidates for high-profile EU roles, including the presidency of the European Central Bank (ECB) and the European Commission.
Concrete Examples
- The European Green Deal: In December 2019, the European Council endorsed the objective of making the EU climate-neutral by 2050. This high-level political commitment became the cornerstone of the European Green Deal, creating the long-term regulatory certainty needed to drive investment in decarbonisation and strengthen the carbon market.
- Adoption of the “Fit for 55” Target: The Council agreed on the ambitious 2030 target of reducing net greenhouse gas emissions by at least 55% compared to 1990 levels. This decision directly triggered the revision of the EU ETS legislation, leading to a steeper reduction in the cap on emissions and impacting the supply-demand dynamics for EUAs.
External Resource: For official information, visit the official website of the European Council.