Brussels, 25/02/2015 (Agence Europe) - The way was cleared on Tuesday 24 February for agreement to be reached between the Parliament, the Council and the European Commission on structural reform of the EU's emissions trading scheme (ETS), swifter and more robust than what the Commission had proposed (see EUROPE 11247).
The Parliament's environment committee, which is chaired by Giovanni La Via (EPP, Italy), gave strong backing to the proposal for the structural reform of the ETS through the creation of a market stability reserve, which they would like to see implemented at the end of 2018. That is two years earlier than the Commission had planned but less ambitious than the 2017 deadline advocated by the most enthusiastic MEPs and by some member states, such as Germany, in the Council (see EUROPE 11221).
To provide a lasting solution to the quota surplus undermining the effectiveness of the ETS, the European Commission proposed on 22 January 2014 that the reform be carried out by annually putting a percentage of the surplus quotas, above a certain threshold, into a reserve, with effect from 1 January 2021 and using a predetermined methodology.
A clear majority of MEPs (39 to 26, with 4 abstentions) for the reform to begin early and also for the 900 million credits “back-loaded” from last year as part of the short-term reform of the ETS to be transferred directly to the reserve. They also called for a fund to be created to boost innovation in the energy sector.
Given the urgency of the need to reform the ETS - the main EU climate policy market instrument for reducing greenhouse gas emissions at the lowest possible cost - it was by a wide majority (57 votes to 10, with 1 abstention) that a mandate was granted to the rapporteur to open trialogue negotiations with a view to reaching a first reading agreement on this draft legislation (amendment of the ETS directive) as quickly as possible.
The compromise was supported by the EPP, S&D, ALDE and ECR Groups. In the view of rapporteur Ivo Belet (EPP, Belgium), it is a balanced text which “sends a strong signal that Parliament is serious about fighting climate change while at the same time bearing in mind the concerns of industry”. Furthermore, “the market stability reserve will ensure that CO2 prices spur investments in greater energy efficiency”, he stated.
“The ERTS is the best available option for ensuring a smooth transition towards low carbon technologies and enabling industry to make the right investment decisions”, said La Via.
According to the committee vote, therefore:
the stability reserve will be set up on 2018 and come into operation before 31 December 2018;
the 900 million back-loaded credits from 2014-2016 should not be returned to the market from 2019, as initially intended (300 million were to have been returned to the market in 2019 and 600 million in 2020), but placed in the reserve instead;
the profits generated by the auctioning of 300 million allowances should be invested in a special “Energy Innovation Fund” designed to help industry's transition to low-carbon technologies.
On 22 January of this year, the Parliament's industry and energy committee (ETRE) ruled out early implementation of the reserve and immediate transfer of the surplus quotas to the reserve.
Most states within the Council of the EU are keen to see the reserve become operational quickly and for the frozen quotas to be put into the reserve. Thus, Belet is “confident” that a first reading agreement can be reached on a reform which seeks to increase the price of carbon and to allow the ETS to play its role in encouraging investment in clean technologies. (Translation from the original French version)