If Cleared by Governments, Plan Could Boost Carbon Price, European Money for CCS
Tamar Hallerman
GHG Monitor
2/22/13
A key committee in the European Parliament this week voted in favor of a last-ditch effort to prop up the carbon price on the European Union’s Emissions Trading Scheme (ETS) in a move that could eventually trickle down to allow for more money for low-carbon technologies like carbon capture and storage. Members of the EU Parliament’s Environment Committee voted Feb. 19 in favor of a ‘backloading’ proposal. If approved by the EU’s 27 member states, the plan would temporarily remove 900 million carbon allowances from the ETS over next three years and reinsert them back into the market in 2019 and 2020. Lawmakers on the Environment Committee are expected to decide next week whether to move discussion of the backloading proposal to the full 754-member European Parliament in April or speed the process by sending negotiations directly to a group representing EU member states.
Supporters hope the plan can buoy carbon prices in the short term. The price of emissions allowances sunk to an all-time low of €3 ($4) last month, down from €10 ($13.40) last year and an all-time high of €28 ($37) before the financial crisis in 2008. Analysts say the current carbon price is too low to deter large emitters from polluting and is far below the price needed to encourage investments in low carbon technologies like CCS and renewables.
The proposal is seen at best as a short-term fix that will address a portion of what some analysts say is a 1.5 billion glut of carbon credits currently on the market. Some have suggested that the EU instead pursue a more permanent fix of mandating stricter emissions reduction targets or setting a carbon price floor like California. However, countries heavily reliant on coal like Poland have strongly opposed any plans aimed at upping carbon prices on the ETS, arguing that they would compromise growth and economic recovery.
Carbon Price Could Affect EU CCS Funding
Whether the EU is ultimately able to pass the backloading measure will likely have a major effect on European funding available for CCS in the coming year. The European Commission is expected to soon announce the start of the second round of its New Entrants Reserve competition (NER 300), where it will auction off the remaining 100 million emissions allowances set aside for CCS and ‘innovative renewables’ projects. Given that no CCS projects were awarded funding after NER’s first round late last year, EU officials have indicated that CCS projects could have the edge in being selected for European funding in round two. The amount of money available for the second round of funding would directly benefit from a higher carbon price, potentially allowing for more projects to be funded. Round one of NER 300 ended up netting only a small fraction of the money initially expected from the auctioning off of 200 million credits due to the low carbon price on the EU’s ETS.
