The European Parliament rejects short term fix for massive oversupply problem
Today the European Parliament voted against temporarily removing 900m tonnes of CO2 allowances from the European Emissions Trading Scheme that currently the EU Parliament does not support a short-term fix for its ailing carbon market.
The vote against is a setback for all those who believe the ETS is most efficient way for the EU to incentivise investments in low carbon solutions. Prices have moved to new lows as the market absorbs the news that the regular auctioning of allowances is set to continue to flood an already flooded market. New data will be released on May 15th which is set to confirm that the market currently has around 2 billion (one year’s worth) of excess allowances.
Many of the opposing MEPs in the debate in Strasbourg on Monday stated that they supported a more fundamental reform of the policy but did not support the ‘back-loading’ proposal as it was only a temporary solution.
The ETS is still in place and it is now incumbent upon Members who declared support for the EU ETS, but not the back-load, to put pressure on the Commission to move forward with structural reform of the ETS. The Commission has already started stakeholder discussions regarding six potential bigger fixes to the policy and a new legislative proposal could still come forward later this year. Structural reform is supported by industry and environmentalists alike as it is expected to address a range of issues including the ambition in the scheme and measures to guard against potential carbon leakage in the period post 2020.
Commenting on the vote today, Sandbag’s Brussels based campaigner Rob Elsworth said:
“The outcome of the vote is unfortunate. It sends the wrong message to companies, to the public and the international community. It’s now incumbent on those MEPs who said they support the long term success of the EU ETS to act to prevent the EU’s climate policy from drifting dangerously off course. In the meantime, Member State climate policies are now likely to become more fragmented and this will have a negative impact on the common market.”
Baroness Worthington, Founder of Sandbag added:
“The carbon market in Europe has suffered a real blow today. It remains to be seen if the Commission can come forward with a more ambitious rescue plan that could be more successful in gathering the support of MEPs. Whatever happens it seems certain that in the short the EU will miss out on much needed investment in increased industrial efficiency and the low carbon economy at precisely the time when other countries such as China and the US are starting to catch up.”