EU votes to fix carbon market in 2019

EU lawmakers have voted to start fixing the EU Emissions Trading Scheme (ETS) in 2019, two years ahead of schedule. The changes, which have been welcomed by the renewable industry, mean billions of carbon allowance will be held back.

The EU-ETS covers over 11,000 factories, power stations and other installations. It operates on a cap-and-trade system, where the total amount of emissions that can be emitted is set and then allowances can be traded. The system aims to cut emissions by reducing the cap over time. It is expected that in 2020 emissions from sectors covered by the ETS will be 21% lower than in 2005.

In March EU member states agreed to seek cutting supply to the carbon market in 2021, despite calls for earlier action. A market stability reserve would see the amount of emission allowance units the EU is permitted to auction reduced.

EU lawmakers have now agreed to bring in the reform earlier in order to deal with surplus allowance in the system. The market stability reserve will now be established in 2019, two years ahead of the previous agreement. The changes mean that around two billion allowances will be put in reserve before they enter the market at the end of the decade.

The changes have generally been well accepted by low-carbon industries but some have argued that the reforms could have been more ambitious and provide further incentives for investors.

Ivan Pineda, director of public affairs at the European Wind Energy Association, said, “The start date of 2019 shows that member states are prepared to compromise. It is also pleasing to see that a substantial number of the excess allowances will not be returning to the market and will instead go directly into reserve.”

However, he added, “We have to acknowledge that member states and the parliament could have been far more ambitious in the shake-up of the carbon market and that a much more comprehensive reform is needed in order for this instrument to provide a meaningful signal to investors.”

Photo: sheffield star via Flickr

Further reading:

Business leaders call for stability reserve in EU Emissions Trading Scheme

European lawmakers fail to back carbon market reforms

EU rejects plan to reduce carbon footprint

EU agrees to start carbon market stability reserve in 2021