European lawmakers fail to back carbon market reforms

The European Union Emissions Trading Scheme (EU-ETS), the largest in the world, saw the price of carbon fall after a European Parliament committee failed to back a reform package.

The EU-ETS covers more than 11,000 factories and companies. 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. However, critics argue that there is a surplus in allowances, meaning that carbon prices are too low to influence businesses to cut emissions.

The proposed reform follows calls for placing surplus allowances in a Market Stability Reserve, and then releasing them at a later date if required. Many countries, including the UK and Germany, and businesses have argued that the reform needs to come in by 2017 if it is to revive the market and ensure it is effective.

However, MEPs voted to delay the proposed measures to stabilise the market until 2021 and then overturned their own decision. The committee initially rejected an amendment to begin reform in 2017 by a margin of two votes and the backed reforms in 2021 by a margin of one, leading to the committee rejecting the decision because the margins were too narrow.

European business leaders recently called for a reform of the carbon market to include a Market Stability Reserve by 2017, arguing this would ensure the transition to a low-carbon economy and energy system remains on track.

The UK government also published reform measures in a blueprint last year that aim to encourage lower emissions.

Photo: hisks by Freeimages 

Further reading:

Business leaders call for stability reserve in EU Emissions Trading Scheme

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

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EU approves UK’s renewable subsidy scheme and capacity market

EU 2030 energy and climate targets: the reaction