MEPs agree on carbon price intervention

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Members of the environment committee in the European Parliament have approved an amendment to the proposed Energy Efficiency Directive that is to see carbon prices go up. 

In a bid to create incentives for investment in low-carbon technologies and tackle oversupply, MEPs voted to set aside some €1.4 billion worth of allowances from the EU’s emissions trading system, or ETS, during its third phase of implementation.

The vote took place just as European carbon prices slumped to a historic low of €6.51, a price regarded as too low to encourage investment in low-carbon technology development. The EU’s flagship tool for cutting down on carbon emissions has been eroded because of the financial market shock caused by the sovereign debt crisis in Europe and research groups estimated that there will be surplus of allowances to 2020 ranging from 500 million to 1.4 billion.

“This undermines the effectiveness of the EU ETS and could wipe out billions of urgently needed for low-carbon finance. Withholding allowances from the scheme is therefore essential to restoring confidence in the EU ETS and low-carbon growth up to 2020,” a group of 15 companies and lobby groups said in a joint statement issued last Friday (16 December) asking the European Parliament to back measures to support the ETS. The signatories, which include Dong Energy, Alstom, Shell, Bellona and E3G were pleased with the outcome of the committee’s opinion vote.

“The vote is significant, it is the first step in realising EU’s climate ambitions and I expect more and more people in the EP and member states supporting this, because there is so much money at stake”, Sanjeev Kumar of environmental group E3G told EURACTIV. 

Although this sends out a “strong positive message”, it serves just to prepare the ground for the “very tough negotiations” to come. “The vote puts the issue on the agenda of the upcoming [industry] committee, which cannot ignore it,” Kumar said.

Christian-Democrat MEP Peter Liese, rapporteur for the committee, called this a “cautious proposal”. “We approved a careful intervention in the ETS.

The Commission should set a significant number of allowances aside to stabilise the carbon price, but we want the Commission to monitor the development and guarantee that the carbon price will not go up to more than the €30 we expected in 2008,” Liese said, adding that the strategies of many member states which were based on the revenues from ETS could not work anymore.

Christian-Democrat MEP Peter Lieserapporteur for the environment committee, said: "Very important is that the best performers at the energy intensive industry, according to benchmarks, should not get any additional burden. Many colleagues argued for a much more rigid intervention, which we could fortunately avoid. On the other hand a careful intervention is necessary, because if the carbon price too low, there is no incentive for investment in low-carbon technologies."

Europe aims to reduce its primary energy use by 20% in 2020 “simply by applying cost-effective energy savings measures”.

The current Energy Efficiency Directive was proposed by the Commission in summer 2011 to update the previous Energy Efficiency Action Plan, which had not been designed to fashion full energy savings. The 20% will not be reached, unless the EU doubles its energy savings efforts from the current projection of 9%.

In its directive, the European Commission proposes individual measures for each of the sectors that could play a role in reducing energy consumption. 



As regards to ETS, under the Kyoto Protocol, industrialised countries can meet part of their climate targets by investing in carbon-reduction projects in developing countries.

The arrangement, called the Clean Development Mechanism, operates on the condition that projects generating credits have to ensure 'additionality', or the principle that the reductions they achieve would not have occurred without the incentive of foreign finance.

The mechanism has attracted criticism, however,

as the additionality criterion has been abused. Credits granted for projects that should not have qualified in the first place have allowed developed countries to dodge their climate commitments, critics say.

In January 2009, the European Commission presented a proposal for a global agreement to replace the Kyoto Protocol. The blueprint proposed an overhaul of the mechanism to ensure that only projects delivering additional reductions and targeting more costly cuts receive credits.

  • 24 Jan. 2012:  ITRE (Industry, Research and Energy) committee vote on the Energy Efficiency Directive
  • 1 Jan. 2012: Aviation brought into the ETS
  • 1 Jan. 2012: California carbon market due to begin trading
  • 1 Jan. 2013: Phase IV of the ETS begins
  • 2015: Australia to launch Emissions Trading Scheme
  • 2015: UNFCCC mandated to agree a new globally binding climate deal for implementation by 2020
  • 2020: EU member states obliged to have reduced carbon emissions 20% on 1990 levels, and increased the share of renewables in the energy mix by the same amount.
  • 2020: UNFCCC global climate deal to be activated




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