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ETS backloading: carbon market schemes at a turning point

Environment09-12-2013 - 17:54
 

Plans to freeze the auctioning of some CO2 permits, so as to raise their price and thus encourage firms to invest in low-carbon innovation, will be put to a final vote on Tuesday, after EU ministers endorsed Parliament’s July 2013 proposal setting stricter conditions for the freeze. The aim is to restore the incentive effect of the Emissions Trading System, which is designed to cut greenhouse gas emissions and tackle climate change.


 

“Our House will have to fulfil a very important responsibility on Tuesday. This is the first time that the Council of Ministers has endorsed a Parliament position without a change. Both EU chambers are on the same line, and it is of the utmost importance that we are consistent and stick to our July position. I have confidence in my colleagues. We can achieve a clear majority”, said Matthias Groote (S&D, DE), who is steering the legislation through Parliament.


“Expectations are very high. Exchanges at the Warsaw climate conference last month highlighted that carbon market schemes are now at a turning point. In order to allow the EU ETS to reach its maturity, we parliamentarians must deliver and let backloading happen” he added.

REF. : 20131209BKG30220
 
 

“Backloading” surplus credits

The growing surplus of emission allowances – due to oversupply and the economic slowdown – has driven the carbon price well below the levels expected when the ETS was created. At the European Commission's recommendation, Parliament and Council will therefore vote on plans to allow the Commission to “backload” – or delay - the timing of a portion of credits to be auctioned.


An amendment proposed by Parliament and approved by Council states that the European Commission may, in exceptional circumstances, adapt the timing of auctions, provided an impact assessment shows the sectors concerned will not face a significant risk of companies relocating outside the EU. The Commission will only be able to make one such adaptation in the third phase of the Emissions Trading System (ETS) for a maximum of 900 million allowances.

 
 

Background


The EU emissions trading system (EU ETS) is a cornerstone of the European Union's policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively. The first - and still by far the biggest - international system for trading greenhouse gas emission allowances, it covers more than 11,000 power stations and industrial plants in 31 countries, as well as airlines.


Since its creation in 2005, the ETS has set an overall emissions ceiling which is gradually being reduced over the long term. By 2020, emissions from industrial sectors covered by the ETS will be 21% lower than in 2005.


Beneath this ceiling, companies receive or buy credits auctioned by member states. One credit corresponds to one ton of CO2 emissions. Companies may also sell on unused credits. Limiting the supply of credits ensures that they retain value, so the scheme rewards companies that invest in limiting emissions.


 
 
 
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