TheCompensators* » Backloading proposal: second round

Backloading proposal: second round

Last week, the European Parliament’s Environment Committee (ENVI) voted in favor of an amended version of the so-called backloading proposal. After the proposal was narrowly rejected in April, the European Parliament’s plenary is expected to vote on backloading for the second time in Strasbourg on July 3rd.

Under the new proposal, 900 million allowances will be withdrawn from the market in order to increase carbon prices. However, according to the new amendment, carbon allowances will be reintroduced into the market in a “predictable and linear manner starting from the year following that during which allowances have last been withheld“. This is a stark contrast with the previous proposal which would have began reintroducing certificates in 2019, at the end of the trading phase. Also, the previous text included a clause which dictated that there was the possibility for the 900 million allowances to be removed from the market all together. This clause was unfortunately taken out of the amended text. All revenues raised from auctioning allowances will go to fund investment in research and development of low carbon technologies such as carbon capture and storage (CCS).

On the new proposal, the Committee agrees that by 30 June 2015, the Commission shall forward to the European Parliament and to the Council a feasibility study. This study will include a cost-benefit analysis of climate change policies based on instruments other than market mechanisms, including the introduction of a carbon tax at the EU’s borders.

Point Carbon, a leading provider of market intelligence, news, analysis and advisory services for the energy and environmental markets, made a forecast
of the future prices for allowances until the end of the third phase. The forecast showed that the average price of carbon allowances will be € 6.3, making very little difference to the current prices.

The backloading proposal is only a tiny step in fixing the ETS in the short term… Still, in the current situation, we at TheCompensators* believe that a tiny step is better than no step at all! The EU must show that a change is taking place and the ETS is not left to collapse, especially when other countries are looking at the EU to take decision on starting their own carbon markets. A negative vote by the European Parliament would bring global climate policy backwards!

 

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