MEPs in the European Parliament's Environment Committee have reaffirmed their support for an emissions trading fix by approving plans to temporarily withhold (backload) the sale of allowances in the EU ETS.
A freeze on the auctioning of some CO2 permits to help boost investment was approved for a second time by Environment Committee MEPs on Wednesday after the full House narrowly rejected the measure in April. The committee proposes stricter conditions and advocates an earlier, predictable reintroduction of credits. MEPs also propose earmarking a portion of permit auction revenues for innovation.
The growing surplus of emission allowances – due to initial oversupply and the economic slowdown – has made the carbon price fall well below the levels estimated when the EU Emissions Trading System (ETS) was created. MEPs in the lead Environment Committee reiterated their support for allowing the Commission to “backload” – or delay - the timing of a portion of credits to be auctioned.
"We now have broader support for a solution that will allow the ETS to fulfil its purpose and support innovation to tackle climate change. I believe the full Parliament will endorse our proposals and let us start negotiations with EU ministers as soon as possible. As I have always said, backloading is a quick, temporary fix. Structural reform of our Emissions Trading System will follow to ensure it remains the cornerstone of EU's climate policy and an inspiration to others around the world", said EP rapporteur Matthias Groote (S&D, DE) who is steering the legislation through Parliament.
Avoid companies relocating outside the EU
In an approved consolidated amendment tabled by the EPP, S&D and ALDE groups, MEPs say the Commission "may, in exceptional circumstances" adapt the timing of auctions, provided an impact assessment shows the sectors concerned will not face "significant risk" of companies relocating outside the EU. "The Commission shall make no more than one such adaptation and only in the third phase of ETS 2013-2020", the text adds.
Credits withheld should be reintroduced "in a predictable and linear manner starting from the year following that during which allowances have last been withheld" the text says. The original draft from the Commission proposed returning them in 2019-2020.
Earmarking auction revenues to fund low-carbon technologies
MEPs capped the number of credits to be frozen at a maximum of 900 million. Of these, 600 million must be made available to set up a fund to support the development of innovative low-carbon technologies, demonstration projects and measures intended to reduce the costs and carbon emissions of energy-intensive industries, as well as for the "social and skill-related aspects of the low-carbon transition", the text says. The text is to be put to a plenary vote on July 3 in Strasbourg.
European NGOs WWF and CAN Europe cautiously welcomed the European Parliament Environment Committee's support for the proposal to temporarily curb the oversupply of emission allowances in the EU emissions trading scheme (ETS), however both regret that the Parliament included measures to weaken this support in its position.
The backloading proposal will go some way toward mitigating the severe problems faced by the EU's carbon market, but deeper reform of the ETS is urgently needed.
EU climate policy officer for WWF, Sam Van den plas, said: "Today the ailing EU carbon market was given emergency treatment, as a temporary first step towards structural reforms of the carbon market. Parliament must ensure that it does not let the air out of the ambulance's tires now. Handing out more blank cheques to energy intensive industries is unnecessary and irresponsible."
In today's vote, a set of compromise amendments gained cross-party support, reconfirming the EU Commission's mandate for a one-off intervention in the carbon market. However, the amendments also contain provisions for a dedicated fund to compensate energy intensive industries, as well as a more generous definition for the sectors at risk of carbon leakage. NGOs warn these additional amendments introduce excessive loopholes and could unnecessarily complicate further negotiations with EU Member States and the Commission.
Julia Michalak, CAN Europe climate policy officer, said:
"MEPs are trying to have their cake and eat it too. The backloading compromise adopted today is nothing like the proposal made by the Commission last summer. Backloading is now as full of holes as a Swiss cheese."