EU carbon market downgraded from flagship to backstop

09 November 2017
by eub2 -- last modified 09 November 2017

EU lawmakers today struck a tentative deal on the reform of the EU Emissions Trading System (ETS) for the period after 2020. For WWF this inadequate deal, which will pay heavy industry to continue polluting, makes Europe’s Paris Agreement climate commitments look meaningless. It puts huge pressure on EU lawmakers to ensure the the Clean Energy package delivers the missing climate action.

In the early hours of this morning an initial final agreement between the EU institutions (European Parliament, European Council and European Commission) was reached on the reform of the EU Emissions Trading System.  This is the first major EU climate law to be updated and agreed for the period after 2020 as part of the 2030 climate and energy package and Europe's implementation of the Paris Agreement. The EU ETS is one of Europe's key instrument to meeting its commitments under the Paris Climate Agreement, covering 40% of EU greenhouse gas emissions.

 

The agreement recognises the problematic nature of the vast oversupply of ETS emission allowances, and the detrimental effect on the carbon price signal and clean investments in Europe. The agreement therefore contains provisions to strengthen the ETS Market Stability Reserve, and allows for taking surplus allowances off the market permanently. On the other hand, energy intensive industrial sectors will receive about 6.5 billion ETS pollution permits for free up to 2030. By doing so, EU Member States have forgone more than €160 billion in ETS auctioning revenues. WWF calls for an end to this pollution subsidy, and instead for the ETS to be used for investments into invests in clean energy solutions and industrial innovation projects.

 

EU policy-makers also agreed on criteria for projects to be supported by the ETS funding mechanisms, but failed to endorse a specific Emission Performance Standard (EPS) to rule out investments in large polluting power plants. Other criteria were agreed to partly exclude support to power plants using solid fossil fuels, but further rules will need to be implemented to avoid bad investment decision in member states with lower GDP.

 

Sam Van den plas, senior EU climate policy officer at WWF European Policy Office said:

 

 

"You couldn't make it up. While EU negotiators at COP23 in Bonn are making progress on the Paris Agreement, EU decision-makers back in Brussels are busy undermining it. Today's shameful agreement on ETS reform means Europe's largest emitters will be paid to pollute, rather than having to pay.

 

"It's a relief to see that Europe is finally lowering the supply of ETS allowances. However, we'll have to wait at least five more years before this measure really kicks in.

 

It's clear this ETS must serve as a basis for further action and that will have to take place through the Clean Energy Package.

 

"Policy-makers must grasp the opportunity to make sure renewable energy and efficiency are ramped up rapidly, or the EU's signature on the Paris Agreement will be pointless," Van den plas added.

The European Policy Office helps shape EU policies that impact on the European and global environment.

WWF