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10/12/2016

Tory tipped to lead ETS reform in EU Parliament

UK & Europe

Tory tipped to lead ETS reform in EU Parliament

Ian Duncan MEP on his first day as an MEP in 2014.

[European Parliament/Flickr]

A Conservative MEP is hotly tipped to lead the European Parliament debate over reforms to the European Union’s Emissions Trading System (ETS), a cornerstone of the bloc’s fight against climate change.

Dr Ian Duncan, who represents Scotland and is part of the Eurosceptic European Conservatives and Reformists (ECR) group, is favourite to be named the bill’s lead rapporteur tomorrow (8 September).

Sources today (7 September) told EurActiv the 42-year-old would be “very interested in the role”.

The ECR will meet tomorrow to finalise the decision. A party official told Carbon Pulse last week that the group would steer the bill through Parliament.

The debate over post-2020 ETS reforms, designed to repair the EU’s broken carbon trading market, will be closely watched.

Leaders worldwide are preparing for the UN Climate Change Conference in Paris this November. The conference aims to strike a legally binding deal to limit global warming to two degrees above pre-industrial levels. 

If selected, Duncan’s first job will be to write a report in response to the European Commission’s July proposal for ETS reform.

>>Read: ETS reform: EU tightens screw on ‘carbon leakage’ handouts for polluting industries

The report should set out how the ETS will help the EU meet its commitment to cut greenhouse gas emissions to 40% under 1990 levels by 2030.

That target was hailed by EU leaders as an ambitious statement of intent ahead of the Paris conference after they agreed it last year.

>>Read: EU leaders adopt ‘flexible’ energy and climate targets for 2030

Before the reforms can ultimately become law, both Parliament and Council of Ministers must agree an identical text. That is expected to take at least a year.

World’s biggest market

The ETS is the world’s biggest scheme for trading emissions allowances. Regulated businesses measure and report their carbon emissions, handing in one allowance for each tonne they release. Permits can be traded on the markets as an incentive for companies to reduce emissions.

Pollution credits were grossly over allocated by several countries during the 2005 initial implementation phase of the ETS, forcing down carbon prices and undermining the scheme’s credibility, which prompted the EU to toughen up the system. Carbon prices have since remained stubbornly low, at about €7.4 a tonne.

Under the Commission’s ETS proposal, energy intensive industries will continue to receive free carbon emissions allowances, as compensation for the EU’s stricter climate rules, but fewer will be granted and fewer industries will qualify for them. The annual rate at which it reduces allowances, compared to the current ETS trading period, will also be speeded up.

Duncan’s credentials

Elected in 2014, Duncan was shadow rapporteur on the Market Stability Reserve, a bill to bolster the ETS’s resilience to economic shock and cut down the massive surplus of carbon allowances. He backed moves to begin the reforms in 2017 but it was eventually agreed it would start in 2019.

>>Read: MEPs set to back carbon market 2019 reform start

In May 2015, after the deal was struck, he said, Europe’s carbon market has been broken for too long, with the low price of carbon detracting from crucial investment in new technologies such as Carbon Capture and Storage.”

Duncan was also part of the Parliament’s delegation to the Lima UN Climate Conference, a precursor to Paris held to try and build consensus among nations. He said the EU must find a way of recognising the economic cost of developing countries leaving their fossil fuels in the ground, ahead of Paris.

>>Read: Opinion: Cost to developing nations of leaving fossil fuels in the ground must be recognised

>>Read: Opinion: How can developing countries make themselves heard at the UN Climate Change Conference?

He has also warned that Scotland will sink unless climate change is tackled.

>>Read: Opinion: The UK is sinking

Duncan, a former Scottish Parliament envoy in Brussels, is pushing for the creation of a North Sea grid of windfarms, as part of the bloc’s Energy Union project.

That saw him join forces with Dutch Green MEP Bas Eickhout, who co-authored the Intergovernmental Panel on Climate Change report on climate change.

>>Read: North Sea Grid will prove EU is serious about Energy Union

EU reform and Polish coal

The ECR group is dominated by British Conservatives and Polish MEPs. Some Polish politicians have said that the failure to strike a deal on global warming would be in Poland’s interest, given the influence of its large coal industry.

UK Prime Minister David Cameron’s Conservative party is pushing for a series of EU reforms as a condition for its support for the UK to stay in the bloc, when a referendum on British membership is held.

During the 2014 election, Duncan campaigned for reforms and for the in-out referendum, which will now be held before the end of 2017.   

>>Read: Brexit referendum looms after Tory election victory

Background

The ETS is the world’s biggest scheme for trading emissions allowances and a cornerstone of the bloc's fight against climate change. 

Regulated businesses measure and report their carbon emissions, handing in one allowance for each tonne they release. Permits can be traded on the markets as an incentive for companies to reduce emissions.

Pollution credits were grossly over allocated by several countries during the 2005 initial implementation phase of the ETS, forcing down carbon prices and undermining the scheme's credibility, which prompted the EU to toughen up the system. Carbon prices have since remained stubbornly low, at about €7.4 a tonne.

Under the Commission’s ETS proposal, energy intensive industries will continue to receive free carbon emissions allowances, as compensation for the EU’s stricter climate rules, but fewer will be granted and fewer industries will qualify for them. The annual rate at which it reduces allowances, compared to the current ETS trading period, will also be speeded up.

Leaders worldwide are preparing for the UN Climate Change Conference in Paris this November. The conference aims to strike a legally binding deal to cap global warming to two degrees above pre-industrial levels. 

Timeline

  • 8 September: Meeting to name rapporteur
  • 30 November: UN Climate Change Conference in Paris

Further Reading

MEP website

European Commission

UN Climate Change Conference