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Two new ambitious structural measures

Today, the European Parliament’s Industry Committee is proposing two ambitious structural measures. Members of the Parliament will vote on these proposals next week which seek to limit the amount of carbon allowances in the EU- ETS, and to consider implementing a carbon price floor. These two new proposals are a result of the inexplicably cancelled vote last week on fast-tracking negotiations with EU states to back load 900 million allowances.

The proposal seeks to remove carbon allowances off the market by steepening the 1.74% annual decline in numbers allocated to member states. The 1.74% annual decline would only achieve a 70% reduction in emissions by 2050, according to the Commission. The carbon price floor is still to be determined.

Politicians are uneasy about supporting any of these proposals. They are against even the slightest increase in electricity prices especially with the current financial crisis. Concerning the back loading proposal, Germany remains undecided on the proposed carbon market reforms with the Environment Minister Peter Altmaier supporting it and the Economy Minister Philipp Rösler opposed. In the European Parliament, there is also a clear split. The European People’s Party bloc and European Conservatives and Reformists remain opposed to back loading, while the Socialists and Democrats, Greens, most Liberals and the far-left bloc clearly support it.

Chris Davies, an environment committee member stated, “Back loading is likely to have a minimal effect on prices.” “It is just a mechanism to try to ensure that the carbon market can continue to function,” he added. These two new proposals however, will further try ensure that the ETS continues to lead Europe in to a low carbon economy.

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