Abby L. Harvey
GHG Monitor
5/8/2015
The European Council, European Parliament and the Latvian Presidency of the EU Council of Ministers this week informally agreed to a draft law reforming the EU Emissions Trading System by reducing the surplus of carbon credits available for trading. The agreement will now have to be agreed to by the EU Council of Ministers’ committee of permanent representatives. The Environment Committee would then vote on the agreement, followed by Parliament as a whole. A final agreement is expected following the Parliament vote in July. “We have struck a good balance between an ambitious and effective reform of the ETS and strong guarantees to ensure that Europe’s energy-intensive industries are not obliged to move their production facilities to countries outside the EU with less stringent climate policies,” MEP Ivo Belet said in a release issued this week.
The proposed ETS reform law is intended to deal with an ongoing surplus of allowances. The proposed law would develop a Market Stability Reserve, a system under which allowances would automatically be taken off the market if the surplus reached a certain threshold. Those allowances would then be returned to the market if there were a lack of available allowances. “The Market Stability Reserve is an efficient, market-driven tool that will stabilise our ETS system, the central pillar of Europe’s sustainability and climate policy,” Belet said. Last year, 900 million allowances were taken off the market and “back loaded.” Those allowances would automatically be placed in the MSR.
Start Date Called into Question
Under the proposed rule, the MSR would begin operating in early 2019, earlier than originally proposed by the European Commission. However, this is not early enough to satisfy some environmental groups. “Despite the start date of 2019 representing an improvement from the Commission’s initial proposal of 2021, Bellona had hoped for a start date as soon as possible. A swifter introduction of the MSR would lessen risks to much needed green investment in the EU” Jonas Helseth, Director at the Norwegian environmental group Bellona Europa, said this week in a release. “The deployment of Carbon Capture and Storage (CCS) for instance, has been solely dependent on the carbon price in the ETS, which has been persistently low and volatile throughout the first three trading periods. The agreement on a reform package therefore sends some hope for rectifying this.”
