EU Lawmakers Divided on Post-2020 Emissions-Market Reform

03 October 2016 | Mitigation

European Parliament lawmakers presented differing visions for Europe’s carbon-market reform in a signal to investors that an overhaul of the ailing cap-and-trade program after 2020 will likely require months of further political bargaining.

Members of the assembly’s environment committee commented on some of the more than 700 amendments submitted to a proposal put forward by the European Commission last year, before nations across the world reached in December in Paris the most sweeping deal so far to combat climate change.

Some of the lawmakers want to change the commission’s plan in order to enact even faster emissions cuts in Europe and curb oversupply in the market, which added to an 80 percent drop in carbon prices in the past eight years. Others aim at protecting the industry from what some politicians fear could be an excessive rise in pollution costs in the next decade.

Benchmark carbon allowances in the EU market, the world’s biggest, rose 4.4 percent to 5.17 euros a metric ton on Thursday at the ICE Futures Europe exchange in London. That compares with the range of 25-30 euros envisaged by lawmakers when the rules for the 2013-2020 period were established last decade.

“Paris has changed the debate in terms of climate ambition,” Ian Duncan, a British member of the committee responsible for steering the reform through the Parliament, told Bloomberg News before the debate. “There is a desire across the political spectrum that the EU Emissions Trading System should deliver on the pledges made in Paris last year.”

The ETS is the 28-nation EU’s main tool to meet its target of cutting emissions by 20 percent in 2020 compared with 1990 levels. The bloc’s leaders decided in October to tighten the headline goal to 40 percent by 2030, an objective that requires a 43 percent cut in greenhouse gases from companies covered by the carbon market compared with 2005.

To achieve that target, heads of government agreed that the cap for emissions from around 12,000 installations owned by utilities and manufacturers in the ETS should decrease by 2.2 percent each year starting in 2021. In the current eight-year phase that started in 2013, the annual pace of pollution reduction is 1.74 percent.



Source: Bloomberg