Berlin pushes Brussels to expedite emissions trading reforms

A coal power generation plant in Weisweiler, Germany. May 2014 [Thorsten Mohr/Flickr]

A coal power generation plant in Weisweiler, Germany. May 2014. [Thorsten Mohr/Flickr]

Germany has expressed its support for a proposal from the European Commission to reform the EU’s emissions trading system, but it urges the EU to pursue more extensive improvements, and to introduce a so-called market stability reserve within the current parliamentary term. EURACTIV Germany reports.

In the fight against climate change, the German government is pushing for quicker reforms than the European Commission over the EU’s Emission Trading System (ETS). The second step of the process must take effect sooner than the Commission’s 2021 plans, Germany’s Ministry of the Environment explained on Thursday (12 June) in Berlin.

“With our position, we are sending a clear signal for the climate protection debate in the European Union,” Federal Environment Minister Barbara Hendricks said. “Germany wants to contribute to the EU setting ambitious targets and will move decisively forward so the latter will achieve them.”

The German government hopes to speed up plans for a so-called market stability reserve in 2020, expediting these to be implemented within the current parliamentary term.

“We consider it necessary to have a markedly early start for the mechanism before 2020, starting in the year 2017,” the German opinion on the Commission’s proposal read. The common position was agreed upon between relevant departments in Germany and then submitted to Brussels.

To support prices, the EU uses so-called “back-loading” to delay the auctioning of pollution permits for 900 million tons of CO2 – a measure that is not seen as sufficient by many environmental politicians. These permits are then expected to be placed back on the market by 2020.

The German government, on the other hand, is proposing a prompt transfer of the 900 million certificates directly into the market stability reserve.

According to its plans, the Commission intends to pull up to 12% of CO2 emission rights certificates from the market under specific conditions. One of the preconditions states that at least 100 million papers must be taken from the market.

If, during its yearly calculations, the EU authority determines that less than 400 million certificates are in circulation, then it will release 100 million emissions rights back on the market. If less than 100 million certificates are available in the reserve, all papers must be released.

In this way, the price of emission permits can be stabilised during times of economic stagnation and low production.

“Carbon leakage”

But the German government wants to ensure that company relocations do not occur as a result of climate protection regulation (often referred to as “carbon leakage”).

“We do not want to harm the competitiveness of German industry,” Hendricks said in Berlin, “for this reason, we will make sure that no German company has to relocate jobs to foreign countries due to climate protection.”

The Federal Ministry of the Environment has an interest in speedy reform since Germany may miss its national climate targets planned to be met by 2020. The country’s CO2 emissions are supposed to be reduced to at least 40% below 1990 levels. As a result of low CO2 prices, coal power plants can currently produce quite cheaply and are not being driven from the market by green energy producers.

Taking this stance, Hendricks said Germany is moving forward within the EU and has re-established its leading role in climate protection policy.

The German environment minister is optimistic about Germany’s position: “The Action Programme Climate Protection 2020 will additionally allow us to ensure that greenhouse gas emissions in Germany are reduced by 40% compared to 1990, reaching the 2020 target.”

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 EU allows energy intensive industries such as BASF and Arcelor Mittal to receive the vast majority of their carbon permits under the ETS for free.

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