Brussels, 08/07/2015 (Agence Europe) - Following a vote of the European Parliament on Wednesday 8 July in Strasbourg, the way is now clear for the structural reform of the emissions quotas trading system (ETS) of the EU, by means of the creation of a market stability reserve, to be up and running from 1 January 2019.
By a large majority (495 votes in favour, 158 against and 49 abstentions), the MEPs confirmed the inter-institutional agreement reached in May to tackle the problem of the surplus of quotas on the market, which considerably sunk the price per tonne of carbon and prevented the system from realising its potential to encourage investment in clean technologies and renewable energies (see EUROPE 11309) .
This is a first step towards a longer-term reform of the ETS which the European Commission is preparing for the post-2020 period (fourth trading period of the ETS), with a view to presenting a proposal, which is anticipated for 15 July (see EUROPE 11349). It was welcomed by all of the political groups and many observers. The ball is now in the court of the Council of the EU, which will proceed to the formal adoption of the text (modification of directive 2003/87/EC) in September of this year.
“The market stability reserve is an efficient, market-driven tool that will stabilise our ETS system and thereby save the central pillar of Europe's sustainability and climate policy. The market stability reserve is a crucial building block to help ensure that CO2 prices spur innovation in the field of energy efficiency”, said a delighted Ivo Belet (EPP, Belgium), who led the Parliament's delegation in the trialogue negotiations.
As well as an early start for the stability reserve (the initial proposal saw it implemented in 2021), the text provides for the following:
the 900 million quotas frozen in 2014 will be paid directly into the reserve instead of re-entering the market in 2020;
some 600 million quotas which have not been allocated, either because they have been reserved for market newcomers or have become available due to the closure of industrial installations, will be paid into the reserve after 2020 and their future use will be determined in the framework of the revision of the ETS;
the quotas allocated to the countries of Central and Eastern Europe under the heading of solidarity between member states of the EU (these 'solidarity quotas' represent 10% of the annual quota numbers) will not be paid into the reserve until 2025;
in order to promote innovative, low-carbon projects, the Commission will consider, in the framework of the proposed revision of the ETS, setting up a fund for innovation of 50 million quotas;
the revision of the ETS and of the stability reserve will take account of the situation of companies genuinely exposed to a risk of carbon leaks (delocalisation) and issues concerning the competitiveness of European industry, jobs and GDP.
Underlining the urgent need to reform the ETS, Matthias Groote (S&D, Germany), his group's spokesman for climate and the environment, said that “the introduction of the market stability reserve will send a strong signal to the markets and already begin to influence long-term investment decisions, avoiding costly mistakes and technology lock-in”.
The Greens/EFA welcomed this step forward, but argued that the ETS needs a more ambitious and permanent reform to put it back on track. In the view of Bas Eickhout (Greens/EFA, Belgium), his group's spokesperson for the climate, “this is a rare piece of good news for the EU carbon market”. “The establishment of a reserve mechanism to address the disparity between the flexible demand and fixed supply of emission allowances is a welcome step. MEPs today made the reserve mechanism more effective in the short term by transferring into the reserve the glut of carbon emission allowances that would otherwise have flooded the market in 2019 and 2020”, he said. However, he pointed out that this stability reserve “will not be a permanent fix to the enormous surplus (of quotas) which will, if left unaddressed, undermine the integrity of future climate targets”.
The WWF sees things very much the same way. The NGO takes the view that the reform called for by the Parliament is a step in the right direction to reduce the surplus of quotas on the market, but that the stability reserve will not be able to do so quickly enough and sustainably enough to fully address the two billion surplus quotas which have been predicted by 2020. “WWF counts on the Juncker Commission to deliver a legislative proposal that delivers real emissions reductions and a meaningful price on carbon pollution, where the polluters pay instead of being paid”, said Geneviève Pons, the new Director of the WWF European Policy Office. (Aminata Niang)