France Seeks German Support for Carbon Emissions Floor Price

13 May 2016 | Markets

French Environment and Energy Minister Segolene Royal plans a domestic floor price for carbon of about five times the current European level and hopes Germany and other European nations will follow.

“The idea is that we decide on it together with Germany, and that we create a momentum for other European countries,” Royal said Tuesday in an interview in Paris. The price, about 30 euros ($34) a ton, will be included in the finance bill for next year, she said.

The plunge in the price of European carbon permits by almost 80 percent from their 2008 peak has eroded the penalty for burning coal, the most polluting fuel. Companies from Electricite de France SA to Engie SA have lobbied for a minimum price of at least 30 euros, arguing it would boost the use of their cleaner natural gas-fired power stations. Coal plant operator, EON SE’s Uniper unit, said last month that a floor price would jeopardize jobs.

Royal commissioned Engie Chairman Gerard Mestrallet to prepare proposals for a Europe-wide “corridor” including a minimum price, which would rise over time, she said. The U.K. already has a similar program in place.

“The idea is that of a corridor of carbon prices with a floor, with some possible change to smooth out a transition,” Royal said. The money raised would be used to help fund renewable energy investments, she said.

French President Francois Hollande, who is trying to secure the achievements of the Paris climate summit last year, has pledged that his country will unilaterally adopt a floor price. Germany is considering advocating a Europe-wide minimum for permits, according to a draft document obtained by Bloomberg News.

By joining the Carbon Pricing Leadership Coalition, German Chancellor Angela Merkel has signaled that she’s willing to take further steps, Royal said. Germany’s Economy and Energy Minister Sigmar Gabriel is “not necessarily” pushing for a floor price, Royal said.

EU Climate and Energy Commissioner Miguel Arias Canete spoke against a price floor last month, defending the current design of the ETS, which has no floors or ceilings. To reduce a glut of carbon allowances weighing on prices, the EU decided to implement from 2019 the market stability reserve, a mechanism that would automatically control the supply of permits.

A change to the EU emissions market law would need a proposal by the commission, the 28-nation bloc’s regulatory arm. Such a draft would then require qualified-majority support from national governments and majority backing from the European Parliament.


Source: Bloomberg