The European Commission will hold three meetings with key industry groups this summer to thrash out whether the free allocation of carbon permits to big polluters should continue after 2020, when current measures expire.
The announcement follows the failure last month by EU leaders to agree on the bloc’s 2030 energy and climate goals, instead setting an October deadline amid divisions over whether to firm up the plan ahead of global talks on tackling climate change.
“The results of the consultations will provide input to the European Council’s October 22-23 discussions on the 2030 climate and energy framework,” the Commission said on its website.
In January, Brussels proposed setting an EU-wide greenhouse gas reduction goal of 40% below 1990 levels by 2030, deepening the current 2020 target of a 20% cut.
That target would lower the cap on emissions for over 13,000 companies under the Emissions Trading System (ETS), which regulates around half of the bloc’s greenhouse gas output and obliges firms to hold one permit for every tonne of carbon they emit.
The EU allows energy intensive industries such as BASF and Arcelor Mittal to receive the vast majority of their carbon permits under the EU’s Emissions Trading System (ETS) for free.
These companies say that competition from countries without such regulations could otherwise force them to relocate abroad, an empirically unproved phenomenon known as ‘carbon leakage’.
The EU’s 2030 climate and energy communication indicated that an “improved and better focused” free allocation system would continue after 2020, unless other major economies introduced comparable legislation.
In the stakeholder meetings, industry will be consulted on:
- Whether the current system provides adequate safeguards against carbon leakage
- Whether free allocation impacts on incentives to innovate and cut emissions
- The trajectory of decline for free allowances in the system after 2020 necessary to meet decarbonisation goals
- Measuring the and monitoring the effect of climate and energy policy on industrial competitiveness.
The Commission said the first webstreamed meeting will be held on June 16, with the other two tentatively scheduled for July and September.
The EU is among a handful of bodies or nations that have agreed to legally-binding emission targets under the UN’s Kyoto Protocol, but all nations have pledged to curb emissions under a new U.N. climate pact due to be signed in 2015 and to take effect from 2020.
With a turnover that reached around €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.
The scheme has proved influential. Although Australia has abandoned plans to begin carbon trading in 2015, Thailand and Vietnam have both unveiled plans to launch ETS’s, China is due to launch pilot schemes across several provinces this year, and India will ring the bell for trading on an energy efficiency market in 2014. Mexico and Taiwan are also planning to introduce carbon markets.
- 16 June 2014: First Stakeholder meeting on carbon leakage rules
- July 2014: Second stakeholder meeting on carbon leakage rules
- September 2014: Third stakeholder meeting on carbon leakage rules
- 23 September 2014: UN Climate Summit in New York
- 1-12 December 2014: UNFCCC conference in Lima, Peru
- October 22 2014: EU Council to decide on 2030 climate and energy goals
- December 2015: Key UNFCCC conference in Paris
- 2020: Deadline for EU to meet its 2020 package of climate and energy goals
- DG Climate: Structural Reform of the ETS
- DG Climate: Carbon leakage stakeholder consultations announcement
- DG Climate: Stakeholder consultations information note
- DG Climate: 2030 climate and energy policies
- DG Climate: Carbon market reform press release
- DG Climate: Q&A - Emissions Trading
- DG Climate: EU ETS
- DG Climate Action: ETS Legislation
- Bloomberg New Energy Finance: BNEF
- Thomson Reuters: Point Carbon
- International Emissions Trading Association: IETA
- EurActiv Poland: Parlament Europejski zatwierdzi? backloading
- EurActiv Slovakia Komisia navrhuje stabiliza?nú rezervu pre trh s uhlíkom