Business leaders call for stability reserve in EU Emissions Trading Scheme

European business leaders are calling for the EU Emissions Trading Scheme (EU-ETS) to be reformed to include a Market Stability Reserve by 2017. They argue such a move is necessary to ensure the low-carbon economy and energy system remains on track.

The EU-ETS covers more than 11,000 factories, power stations and other installations. It operates on a cap-and-trade system, where the total amount of greenhouse gas emissions that can be emitted by the businesses involved is set and allowances can then be traded. A Market Stability Reserve would reduce the amount of emissions allowance units that the EU is permitted to auction on the global market.

In a letter to MEPs The Prince of Wales’ Corporate Leaders Group, which supports strong pro-business policy on climate change, said introducing a Market Stability Reserve earlier rather than later “will give the necessary signals to investors and industry to effectively transition to a low carbon economy and energy system” and “mitigate any downward pressure on the price of carbon from structural economic changes or other energy policies”.

The group, whose members include, BT, EDF Energy, GlaxoSmithKline, Coca Cola, Shell and Unilever, also say the 900 million emission allowance units that have been set aside and will return to auction in 2019-2020 should be included in the Reserve from the outset. This, the letter says, would help to rebalance the market and encourage countries in the decarbonisation process.

“We are convinced that the [proposed] reforms will provide the basis for meeting Europe’s 2030 commitment of at least 40% greenhouse gas emissions reductions and will put is on the road towards our 2050 goals of 80-95% greenhouse gas emissions reductions,” the letter concludes.

Philippe Joubert, chair of the Corporate Leaders Group, said, “The EU-ETS is the cornerstone of EU climate policy, so we have to get this right – it must be reformed to driver forwards green growth sooner rather than later.

“Establishing a Market Stability Reserve by 2017, with the 900 million back-loaded emissions allowance included in the Reserve from the outset, will help rebalance the emissions trading market, enable a more robust carbon price, and stimulate the transition to a low carbon economy.”

The EU-ETS is currently the largest emissions trading scheme, with the second largest opening in South Korea this week. However, when China’s national scheme becomes fully operational in 2020 it will become the largest in the world.

Photo: Greg Goebel via Flickr 

Further reading:

Second-biggest carbon market launched by South Korea

Investors call for Emissions Trading Scheme fix

UK calls for changes to EU emissions system to boost low carbon investment

Business lobby urges European leaders to set ambitious climate change targets

Industry mulls over future of carbon price floor