Europe has failed in its first major opportunity to address climate change, Labour MEP Miriam Dalli said after the approval of a “watered-down” reform of the Emissions Trading System (ETS).

The European Parliament on Wednesday adopted draft reforms to the ETS, a cap-and-trade permit system which regulates industry pollution.

The system covers nearly half of all Europe’s greenhouse gas emissions and is considered a crucial tool in mitigating the effects of climate change.

The new reforms, approved by 379 to 263 votes, fell short of a more environmentally ambitious proposal, which included a faster reduction in emission caps and the elimination of free allowances to several major industries.

On the vote, Malta’s parliament representatives split along party lines, with all three PL MEPs voting against and their Nationalist counterparts supporting the compromise document.

We could not support a watered-down report which can never address climate change and put us on track for what we agreed on in Paris

Dr Dalli told the Times of Malta that the draft agreement reached in the environment committee, of which she is a member, was a step in the right direction for the EU to start actively addressing climate change. It followed the Paris Agreement in 2015 to limit global temperature rises to no more than two degrees above industrial levels.

“Much of what we agreed in committee was eliminated in plenary [on Wednesday],” Dr Dalli said.

“We could not support a watered-down report which can never address climate change and put us on track for what we agreed on in Paris. We agree with the system, but we want a more ambitious system that is fit for purpose.”

Dr Dalli blamed intense lobbying from the cement industry, which was among those proposed for exclusion from free allowances and which currently sees windfall profits of €5 billion from the system, for some of the key concessions to the original agreement. She stressed that the rejected proposals would not have meant a loss of jobs, with other measures to protect industry and minimise the risk of companies moving out of the EU to escape climate regulation.

The reforms will now enter a process of negotiation with individual member states ahead of the final legislation being set.

Conservative lawmakers have described Wednesday’s agreement as the best compromise possible in divisive talks, but climate campaigners have said it falls far short of what was expected.

“With this vote, the EP is backtracking from the Paris climate agreement that it ratified with great fanfare only a few months ago,” Agnes Brandt, senior EU policy officer at Carbon Market Watch said.

“Complementary measures to the carbon market are now required to make sure that we will have a shot at limiting the global temperature rise to levels that are considered safe.”