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08/12/2016

MEPs push to fast-track carbon market debate

Climate & Environment

MEPs push to fast-track carbon market debate

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Frustrated MEPs are planning to fast-track a long-delayed amendment to the Emissions Trading System (ETS) directive, which would confirm the EU’s legal ability to withhold carbon allowances from auction, so boosting depressed carbon prices.

This autumn, the European Commission is expected to publish one proposal on the staggering of carbon allowance auctions, and another structural report on the permanent withdrawal of allowances from market.

But opponents of carbon market reform on the European Parliament’s environment committee have stalled passage of a one-line amendment that would confirm the EU’s legal ability to take the necessary action. 

“It does the parliament’s reputation no good at all if it takes 10 months to deal with one line of legislation,” British MEP Chris Davies (Alliance of Liberals and Democrats for Europe) told EurActiv. “In fact, that would make it the slowest moving parliament in the world.”

A vote on the amendment is not due until 19 February 2013 – much to the chagrin of the European Commission’s top climate civil servant Jos Delbeke – and a 90-day cooling-off period had been feared before a final plenary vote.

But while there is not thought to be a majority on the committee for changing the legislative timetable, the Parliament’s Conference of Presidents can circumvent the cooling-off period, and MEPs are moving to ensure that it does. 

“I think we should be trying to ensure that, once the Conference of Presidents has been asked to facilitate the matter, it is taken to plenary at the earliest possible time, which my secretary-general tells me would be in March,” Davies said.   

However, the delays have left advocates of clean energy seething that an amendment they never believed necessary is holding up progress as the carbon market languishes.

“We could include an amendment asking for structural measures in a certain time frame,” Green MEP Bas Eickhout (the Netherlands) told EurActiv.

Structural measures

Structural measures in the EU’s carbon market review could include increasing the 2020 emissions reduction target to 25%, permanently removing carbon allowances from the ETS, or delaying their release until the ETS’s phase four in 2020. But the paper could also just outline various policy alternatives without offering any guidance.

“The clearest signal to everyone would be an increase in the 2020 emissions reduction target to 25% domestically,” Eickhout said. “That could also be forced into this proposal and those are the sort of discussions we are having at the moment.”

Such amendments, though, would have to follow the environment committee rapporteur’s report, and its slow progress has left MEP’s like Eickhout bemoaning “industrial pressure” from the steel, cement and chemical industries.

“The Conservative side would have preferred to put off this discussion for another five years,” Eickhout said. The 19 February date for a vote was taken as a compromise between Conservative and Green positions, he added.

Energy-intensive industries, however, say that high carbon prices put their sector under onerous financial pressure and increase the risks of ‘carbon leakage’, or companies relocating abroad to continue polluting at the same level.   

Moving goalposts

At a press briefing in Brussels on 10 October, Harald Schwager, an executive director with the chemical giant BASF, complained that the goalposts in the climate debate had been moved since the EU’s original 2020 targets were set in 2009.

“The ETS is increasing the cost of energy and this is no good for energy intensive companies,” he said. “When we accepted the 20% [emissions-reductions] target we were promised we would do that at the lowest possible cost [even if] this meant that the carbon certificate cost nothing. Today we are discussing something completely different.”

Eickhout said the carbon market glut is so extreme that expected EU reforms might be the only thing preventing the carbon price from falling to zero.

The battle lines in the debate between environmentalists and energy intensive industries are thus increasingly being drawn around the value of maintaining any carbon price.

"A discussion on backloading  is not good at all, because it would increase the [carbon] price [when] it was not the intention to create money [for low carbon investments] but to reduce CO2,” Schwager said.

Asked by EurActiv whether BASF supported the EU’s goal of an 80-95% reduction of CO2 emissions by 2050, “this is a difficult question,” Schwager replied. “You can’t answer yes or no [because] it is difficult to predict what technology will bring”.  

EurActiv’s followup question about the carbon price necessary to reach the 2050 targets was also “unanswerable,” he said.

Background

With a turnover of some €90 billion in 2010, the EU's Emissions Trading System is the world's largest carbon market. Around 80% of it is traded in futures markets and 20% in spot markets.

The ETS aims to encourage companies to invest in low-polluting technologies by allocating or selling them allowances to cover their annual emissions. The most efficient companies can then sell unused allowances or bank them.

After a series of VAT "carousel" and "phishing" frauds in 2009, the European Commission proposed tighter security measures. But a number of member states declined to implement them because they said they could not afford to.

One Commission official pointed out that tens of thousands of euros spent on security could prevent millions of euros in losses.

Timeline

  • 17 Oct.: Climate Change Committee meeting
  • 12 Nov.: European Parliament environment committee mini-meeting
  • 15 Nov.: Climate Change Committee meeting
  • 13 Dec.: Climate Change Committee meeting
  • 17 Dec.: European Parliament environment committee to outline draft report
  • 1 Jan. 2013: Third phase of EU ETS trading scheduled to begin, and continue until 2020
  • 19 Feb. 2013: European Parliament environment committee scheduled to vote on crucial one line amendment authorising  carbon market action by the European Commission
  • March 2013: Potential plenary vote in European Parliament on European Commission proposal

Further Reading

European Commission

Market analysis

  • Thomson Reuters: Point Carbon
  • International Emissions Trading Association: IETA