Brussels, 03/07/2013 (Agence Europe) - The EU's Emission Trading System (EU ETS) had a lucky escape when the European Parliament came to its rescue by approving, in Strasbourg on Wednesday 3 July, the amended short-term reform project of the only market instrument dedicated to combating climate change (see EUROPE 10878). The plenary session in fact supported (by 344 votes to 311, with 46 abstentions) the proposal to freeze trading of a certain quantity of surplus quotas that would, as an exceptional measure and up to a maximum of 900 million allowances, be withdrawn from the market at the beginning of the third ETS trading period (2013-2015), to be later re-injected in a predictable and linear manner one year after the last withdrawal from the market and until 2020. In so doing, the Parliament clearly supported the compromise found by the EP committee on the environment (see EUROPE 10870), which had been invited by the plenary session on 16 April to continue working on it.
MEPs thus momentarily put an end to the uncertainty hanging over the possibility of finding a swift remedy to the failings of ETS. The saga of this reform urgently required for stabilising the price of carbon, that has fallen to a historically low level of €3/tonne, has nonetheless not come to an end but the Parliament is opening the way for trialogue negotiations in the hope of being able to reach a first reading agreement with Council on the “backloading” proposal (to delay the timing of a portion of credits to be auctioned), in order to restore a balance between quota supply and demand on the market and thus allow ETS to play its role as an incentive for investment in low carbon emission technologies and renewables. An overwhelming majority (698 votes) of MEPs decided to reserve their final vote for this hoped-for agreement with Council.
Those who feared the short-term reform might be discarded, or even feared the total collapse of ETS, have also heaved a sigh of relief, including the Greens/EFA Group which sees the compromise as the “strict minimum for keeping ETS alive, but not for curing it”.
Mathias Groote (S&D, Germany), the chairman of the parliamentary committee on the environment who is to head negotiations with the Council, was delighted with the result of the vote saying that, although the process took a very long time, they have now put the legislation back on track. To everyone's surprise, he said, they now have a text that looks very much like the first proposal. The Commission can only intervene once on the market during the third auctioning period (2013-2020). “We now have a mandate, (…). We will start negotiations with EU ministers as soon as possible and seek a common solution that will allow the ETS to fulfil its purpose”, he said. Answering reporters who asked when the first trialogue meeting would be held, he said: “That depends on the Council. We hope to be able to begin immediately - during the summer break if necessary”.
There is therefore great pressure on the Council which had hitherto not given any sign of its thinking, as it was waiting for the Parliament to take a stance. This has now happened. Although a growing number of delegations do support the plan to place a temporary freeze on quotas, Germany and Spain have still not finalised their position. “Germany is in a situation that is quite unclear. The minister of the environment has congratulated us. We have received no sign from the Ministry of the Economy. The situation is divided but it will be necessary for Germany to make its position known. And the Council must give some indication. We, in Parliament, have done our work”, Groote added. Time is running short as the German elections will be held on 22 September this year.
MEPs affirm that the Commission “may, in exceptional circumstances” adapt the auctioning timetable on condition that an impact assessment shows the sectors concerned will not face “significant risk” of companies relocating outside the EU. “The Commission shall make no more than one such adaptation for a maximum number of 900 million allowances”, MEPs say. They trust that receipts generated from 600 million such quotas will be allocated to an eco-innovation fund to encourage investment in clean, low-carbon technologies and renewable energies, in order to support demonstration projects, as well as measures intended to reduce, until 2020, costs and carbon emissions from carbon-intensive industries so that they do not relocate outside Europe. A mandate should be entrusted to the European Commission to manage the use of the fund as it does for the NER 300 fund. The Parliament also calls for a proposal for ETS structural reform.
Connie Hedegaard, Commissioner for Climate Action, is delighted. She says: “With today's vote, the European Parliament has sent a clear message: Europe needs an effective ETS and a genuinely European climate policy. I of course welcome this positive vote which also shows that the European Parliament shares the Commission's view: we must have a well-functioning European carbon market to boost innovative low-carbon technologies in Europe. The next step is now for the Council to take a decision. The sooner, the better, so that we can move on to the structural reform of the ETS as soon as possible”. (AN/transl.jl)