EU politicians edge towards 2018 start date for carbon reform

2018 could be the compromise start date for reforms to the Emissions Trading System. [Stefano F/Flickr]

EU politicians are expected to agree on a compromise 2018 start date for reforms to the Emissions Trading System (ETS) to try to bridge divisions over efforts to prop up the world’s biggest carbon market, sources said on Friday (13 February).

In an attempt to boost carbon prices and spur industry to switch to greener energy, the European Commission has proposed a plan to remove hundreds of millions of surplus carbon allowances (EUAs) from the trading system from 2021.

Member states Britain and Germany, which back zero-carbon generation based on nuclear or renewable power, have led calls to start sooner, by 2017. Utilities such as E.ON, seeking support for investment, also want prompt reform.

But energy-intensive industry and Poland, dependent on carbon-heavy coal, say the original proposal is soon enough.

Members of the European Parliament are preparing for the next vote on the market reform on 24 February in their environment committee.

A draft set of compromise amendments seen by Reuters includes a date of 31 December 2018. Parliamentary sources said support was growing for that deadline, although Liberal and Green politicians are still pushing for 2017.

Traders said a 2018 compromise date would be relatively bullish for the market.

“If this (date) goes through in the vote in ENVI (the environment committee), I would expect prices to rise,” one trader, who asked not to be named, said.

ETS allowances rose around 2% to €7.60 a tonne on Friday, still far from all-time highs of more than €30 a hit in 2006.

The ETS is designed to make polluters pay for their emissions, but a surplus of more than 2 billion carbon allowances generated by the economic crisis crushed the market.

Parliamentary sources said the compromise could be agreed next week at preparatory meetings of the various parliamentary groups. If the environment committee passes it, further votes will be needed in the full parliament and from member states.

“A market stability reserve is established in 2018 and shall be operational by 31 December 2018,” a draft parliamentary amendment says, referring to a plan to put hundreds of millions of allowances in a reserve. They would be put back into circulation if demand rises.

A draft document prepared for a closed-door meeting of representatives of member states on Monday says 900 million allowances should not be auctioned in 2019 and 2020 and should instead be placed in the reserve.

More than 50 firms or industry bodies, including E.ON, Alstom and Fortum, have written to members of the European Parliament saying reform should start no later than 2017. 

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