WWF & CAN: European Parliament compromises on ETS reform but it’s not enough to save the climate

MEPs approve proposals to temporarily withhold auction of 900 million CO2 allowances in attempt to reduce glut in the market

The European Parliament has approved plans designed to boost the EU’s carbon market and drive green investment by tackling the glut of allowances that have sunk the price of CO2 to record lows this year.

MEPs in Strasbourg today voted in favour of “backloading” proposals at a plenary vote in Strasbourg, approving plans for the European Commission to temporarily postpone the auction of 900 million allowances for the bloc’s Emissions Trading System (ETS).

The proposals were agreed as acompromise by the EU’s three largest parties, after initial stricter backloading plans was rejected narrowly in April, amid fears from some businesses that the measure would push up the cost of energy across Europe.

The plans were approved by 344 votes to 311, reversing the previous vote that saw 315 vote in favour while 344 opposed the original proposals.

According to Bloomberg, the decision had an immediate effect on the price of carbon with allowances for delivery in December gaining 7.2 per cent to reach €4.60 per tonne on the ICE Futures Europe exchange.

The new deal includes assurances that the backloading measure will not be repeated and that the postponement of the auction would not lead to the permanent withdrawal of the delayed carbon allowances. It also includes plans for a new review of the risk of so-called carbon leakage, whereby energy intensive firms relocate to outside the bloc to avoid the cost of carbon allowances.

However, in a surprise move separate amendments that would have diverted additional funds to help energy intensive industries invest in efficiency measures were rejected.

Sources in Brussels told BusinessGreen the approved proposals were “much closer” to the original backloading plans that were rejected in April than would have been the case if all of the proposed amendments had been approved.

Today’s vote is likely to be welcomed by green businesses and NGOs, including a host of high-profile utilities, which have consistently argued that reforms to the market are needed to drive up the price of carbon.

Miles Austin, executive director at the Carbon Markets and Investment Association (CMIA) hailed the vote as “a great result albeit after a second bite at the cherry”.

“This positive vote now gives the EU ETS breathing space for more profound supply side reforms to be enacted that will prevent the need for another backloading debate in the future,” he added in a statement.

However, concerns remain that the agreed compromises have watered down the original plans to the point where they could prove ineffective at driving up the carbon price.

WWF and CAN Europe argued the number of allowances to be held back should be higher and that backloading must be immediately followed by more long-lasting ETS structural reform, starting with cancellation of back-loaded allowances.

The Commission is due to present formal proposals this autumn outlining how it plans to deliver a longer term fix to the market. It is looking at a series of proposals, including raising the emission reduction target for companies covered by the scheme and permanently withdrawing some allowances from the market.

The vote on backloading must now also be approved by the European Council for the measures to pass. Earlier this week, ministers from 12 member states, including the UK, wrote an open letter backing the plans, suggesting it already has significant support from many countries. However, a number of other countries, including Poland, are thought to be opposed to the proposed changes.

Konrad Hanschmidt, carbon analyst at Bloomberg New Energy Finance, said it was not yet guaranteed that the plan would secure member state approval, predicting the final decision may be delayed until after the German election later this year.

“The backloading plan has passed its largest hurdle so far, but auction curbs are still far from certain and unlikely to start before mid-2014,” he said in a statement. “The focus will now shift from Strasbourg to Berlin, as Germany’s decision on the plan will determine whether it can go ahead.”

However, he added that the vote and the rejection of the accompanying amendments represented a “big victory for the pro-backloading MEPs”. “The Parliament rejected the difficult compromise amendments which would have made future negotiations more complicated,” he added. “This is more bullish than the market had anticipated.”

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• European Parliament compromises on ETS reform but it’s not enough to save the climate

  3 July 2013 (WWF- EU and CAN-E, the Climate Action Network, Europe)

  Today the European Parliament adopted a compromise to revive the EU’s flagging carbon market, the EU Emissions Trading System (ETS). With carbon prices already at all-time lows, Member States now need to put the right price on pollution by strengthening today’s result.

  “The European Parliament has done the minimum to rescue the ETS from redundancy,” said Sam Van den plas of WWF European Policy Office. “Member states should back further measures to eliminate these toxic tonnes permanently from the EU’s carbon market.”

  Parliament rejected provisions that would immediately reintroduce all back-loaded allowances, and provide exemptions and subsidies to heavy industry that assume far higher carbon prices than are seen in reality.

  “Today the European Parliament used its second chance to get back-loading right,” said Julia Michalak of CAN Europe. “By approving back-loading and rejecting several dangerous loopholes that had been proposed as part of a compromise, they’ve paved the way for the necessary deep reform of the EU ETS. Member States must start to negotiate the final outcome as soon as possible – we have lost enough time already.”

  CAN Europe and WWF call on EU policy makers to come up with robust proposals to increase EU climate action.

• http://www.wwf.eu/?209281/European-Parliament-compromises-on-ETS-reform-but-its-not-enough-to-save-the-climate

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http://www.climnet.org/  – Climate Action Network

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