Today in Strasbourg, the European Parliament confirmed the position it adopted on 3rd July to amend the EU ETS (Emissions Trading System) Directive to allow the backloading proposal to move forward. Changing the ETS Directive enables delaying auctions of 900 million pollution permits in order to temporarily correct the massive oversupply on the EU’s carbon market.
EU Member States already indicated support for the backloading proposal by an overwhelming majority on 8 November. On Monday 16 December the Agriculture and Fisheries Ministers will confirm EU Member States’ support for the measure. CAN Europe and WWF fully support the proposed delay of emission allowance auctions as an important first step towards deeper reform of the EU’s carbon market. However, backloading must be immediately followed by more long-lasting ETS structural reform, starting with cancellation of backloaded allowances. In addition, the EU must come forward with ambitious, binding climate and energy targets for 2030 to ensure the right investment signals are in place to make the EU ETS effective.
Quote from Sam Van den plas, Climate Policy Officer, WWF European Policy Office
“The backloading proposal is finally coming closer to becoming reality and EU Member States must now swiftly move to confirm today’s vote. However, this agreement will not offer a permanent solution to revive the EU’s carbon market. The vast oversupply of pollution permits will still threaten the economic and environmental integrity of the current and future climate and energy package.”
Quote from Julia Michalak, EU Climate Policy Officer, CAN Europe
“Without a strong proposal for an EU climate and energy package for 2030, the EU ETS will not be saved. A binding target of at least 55% greenhouse gas reductions for 2030, accompanied by binding, ambitious RES and energy efficiency targets, is necessary to ensure the market won’t remain oversupplied for another one and a half decades. A strong 2030 package is key for ETS structural reform”
Why must the ETS be fixed?
The EU ETS is currently not functioning as envisaged. The scheme is neither contributing in a cost-effective manner to the EU’s climate objective of 80-95% emission cuts by 2050, nor accelerating the required low-carbon transition, and is therefore failing to meet its principal policy objectives.
With back-loading and ETS structural reform in place, auctioning revenues for all Member States would increase significantly between 2014 and 2020. With the right policy choices, these funds can mobilise investments in clean and resource-efficient technologies in the power sector and industry as a whole. A restored carbon price signal will accelerate the modernisation of the power sector especially in central and eastern European Member States, which are obliged to invest the monetary value of the free allowances in the upgrade of their power systems.
Back-loading will not decrease Europe’s competitiveness. In addition to a 100% free allocation of allowances, industrial sectors supposedly at greater risk of ‘carbon leakage’ (the flight of carbon intensive industries to lesser regulatory regimes) – such as steel, cement and glass production – may receive state aid in compensation for increased electricity prices resulting from CO2 costs passed on by power producers. Back-loading will not decrease the surplus of allowances held by many companies.