France goes it alone on carbon price floor
29 April 2016 | Markets
France is preparing to introduce a floor price for carbon emissions, even if the rest of Europe does not follow.
“France must show the way,” said President Francois Hollande at a conference on Monday. Billed as the EU’s flagship climate policy, its emissions trading scheme (ETS) has become a weak driver of clean investment as permits trade at just €5 a tonne.
To send a more predictable market signal, Paris has proposed a price “corridor” for the whole bloc. Regardless of whether that is accepted, it will set a minimum price on power plant emissions at home, to curb coal generation.
The UK has a floor price of £18/t (€23/t), although Westminster has come under pressure from industry – notably the struggling steel sector – to scrap it. In France, the impact will be more limited, as it only affects the power sector, which is less than 10% fossil fuelled.
Analysts expressed scepticism that France’s intervention would make much difference to total emissions. Stig Schjolset, head of carbon analysis at Point Carbon, said: “Whenever you drive down emissions in the ETS sector with domestic measures, it has an impact on the EU carbon price.
“It is always a problem with some of the more ambitious numbers and being impatient… it undermines a little bit the price within the EU ETS.” While French measures would cut emissions in the short term, they add to a surplus of spare allowances, said Dave Jones of think tank Sandbag.
“Any proposal on price floor should also come with a proposal on how to ensure the resulting surplus does not get rolled forward.” Jones also raised concerns the proposal risked getting watered down in future, suggesting a politically independent institution should set the price.
Meanwhile, EU lawmakers are considering ways to strengthen the European Commission’s proposals for the future of the ETS. Euractiv reports the options include a faster tightening of the emissions cap from 2025.
Source: Climate Change News