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26/07/2016

Poland goes to Court of Justice over ETS

Europe's East

Poland goes to Court of Justice over ETS

Siersza Power Plant, Poland.

[Piotr Drabik/Flickr]

The Polish government has decided to mount a legal offensive against the Emissions Trading Scheme reform. It contends that the market stability reserve (MSR) will be introduced too early, which would distort the market. EurActiv Poland reports.

One of the biggest issues in the current incarnation of the Emission Trading Scheme is the relatively low price of an emission allowance: less than €8 per tonne of CO2 at the time of this article’s writing.

The surplus of the allowances is identified as the main source of this situation. The European Parliament estimates that the current surplus amounts to c. 2 billion allowances.

ETS reform

To address this problem, and in order to make ETS more in line with the EU’s climate goals for the post-2020 period, the Commission has planned a significant reform of the whole system.

>>Read: MEPs, member states at odds over ETS reform start

One of the tools to be used for raising prices of the emission allowances will be the market stability reserve. It will be created out of the surplus allowances (900 million of them, to be exact) that will be withdrawn from the market. The MSR will be able to automatically withdraw or make allowances available in order to keep market price in line with the climate goals.

In its initial proposal, the European Commission wanted the market stability reserve to become operative in 2021, after the current emissions trading scheme trading period ends. Yet in the final text of the reform adopted in October by the European Parliament and the Council, the date has been changed to 1 January 2019.

The Polish complaint

This change is the reason the Polish government has decided to file a complaint against the EU with the Court of Justice. The decision (available in Polish here) argues that introduction of the new ETS rules before the end of the current trading period will heavily distort the market. Thus, the government argues, it will impact decisions and investments made with the old system in mind.

>>Read: Poland’s carbon emissions billions to be spent on coal, cutting budget deficit

According to Poland, proceeding with the emissions trading reform violates a number of EU rules. It says that the reform “violates rules of loyal cooperation by adopting a decision contrary to the Council conclusions from 2014, legal certainty and legitimate expectations by changing the rules of trading during the current trading period, and the principle of proportionality by introducing solutions that will lead to realising higher emissions targets than the EU is bound to by the international treaties”. The government demands an annulment of the decision.

Aleksandra Lis, the energy expert at the Sobieski Institute, a conservative think tank with ties to the Polish government, is doubtful about the chances for the ECJ actually annulling the ETS reform.

“There is a chance for Poland getting certain exemptions or privileges, though,” she told EurActiv.pl

Further changes to the emissions trading scehme will be introduced in 2021. They will include an increase of the allowances withdrawn annually from the market.