On Wednesday 16 February the European Parliament’s rapporteur on the review of the EU Emissions Trading System (ETS), Peter Liese (EPP, Germany), tabled a series of amendments to his draft report aimed at reducing the price volatility of the ETS and thus combating rising energy prices.
“The main cause of rising energy prices is our dependency on fossil fuel imports (...) In addition to that, the ETS should also be better designed to mitigate the minor part of the problem that is linked to the volatility of ETS market prices”, the rapporteur underlines in one of his amendments.
He therefore proposes “targeted improvements” that would not interfere with “the proper functioning of the carbon markets, including the role of intermediaries and financial actors in providing liquidity to the market and market access”, particularly for SMEs.
One of the amendments provides for a moderately faster triggering of Article 29a of the EU Directive (2009/29) amending the ETS Directive (2003/87), following a two-step approach.
“While there does exist an article (29a) that is supposed to dampen price increases, this article has not worked despite the huge price increase in recent months”, says Mr Liese.
Specifically, he is proposing that the European Commission should release 100 million allowances from the Market Stability Reserve if, for more than six consecutive months, the average price of allowances is more than twice the average price of the previous two years.
If this addition of allowances does not mitigate the price increase, then the currently applicable procedure would be followed, i.e. the meeting of a committee to assess the situation and take action if the price development does not correspond to a change in market fundamentals.
Currently, Article 29a stipulates that the Commission must convene this committee if, over a period of more than six consecutive months, the price of allowances (and not the average price) is more than three times higher than the average price of allowances in the previous two years (as opposed to two times in the rapporteur’s proposal).
In addition, Mr Liese wants to increase the transparency of the system. He therefore proposes that, following the publication of the European Securities and Markets Authority (ESMA) report on the functioning of the ETS (due in April), the European Commission should present a legislative proposal to introduce a transparency mechanism for the European carbon markets.
See the amendments: https://aeur.eu/f/cr (Original version in French by Damien Genicot)