Plans to freeze the auctioning of some CO2 permits to encourage firms to invest in low-carbon innovation was backed by Parliament on Wednesday, after it narrowly rejected them in April. This time MEPs set stricter conditions for a freeze. The measure aims to restore the incentive effect of the Emissions Trading System, which is designed to cut greenhouse gas emissions and tackle climate change.
The growing surplus of emission allowances – due to oversupply and the economic slowdown – has seen the carbon price fall well below levels estimated when the EU Emissions Trading System (ETS) was created. At the Environment Committee's recommendation, Parliament backed plans to allow the Commission to “backload” – or delay - the timing of a portion of credits to be auctioned.
Connie Hedegaard, EU Commissioner for Climate Action, welcomed today's positive vote by the European Parliament on the carbon market 'backloading' proposal. "With today's vote, the European Parliament has sent a clear message: Europe needs an effective ETS and a genuinely European climate policy. I of course welcome this positive vote which also shows that the European Parliament shares the Commission's view: we must have a well-functioning European carbon market to boost innovative low-carbon technologies in Europe. The next step is now for the Council to take a decision. The sooner, the better, so that we can move on to the structural reform of the ETS as soon as possible."
Next steps:Under the ordinary legislative procedure applicable in this case and laid down in the Treaty (Art. 294 TFEU), a legislative act is adopted if both the Parliament and Council adopt the same text in first reading. Today's vote means that the Parliament has decided to support the Commission's proposal subject to certain amendments, but it has also decided not yet to formalise this position so as to allow for negotiations with the Council with a view to agreeing a single text in first reading. Once the so-called "trialogue" negotiations have led to such a compromise text, that text is then usually adopted formally by the two institutions, thereby leading to adoption in first reading.
"We now have a mandate, as Parliament endorsed our proposals. We will start negotiations with EU ministers as soon as possible and seek a common solution that will allow the ETS to fulfil its purpose" said EP rapporteur Matthias Groote (S&D, DE) who is steering the legislation through Parliament.
"Across all continents, Europe's experience of a market-based system for reducing CO2 emissions is being considered, and seen as a credible option, as most recently in China. We shall not let the ETS be the victim of short-term concerns. Structural reform of our Emissions Trading System will follow to ensure it remains the cornerstone of EU's climate policy" he added.
Avoid companies relocating outside the EU
In approved amendments tabled by the Environment Committee, 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. However, "The Commission shall make no more than one such adaptation for a maximum of 900 million allowances", they add.
The ETS, a carbon market created in 2005, set an overall emissions ceiling which is gradually being reduced over the long term. By 2020, emissions from industry sectors covered by the ETS will be 21% lower than in 2005.
Beneath this ceiling, companies receive or buy credits auctioned by member states. One credit corresponds to one tonne of CO2 emissions. Companies may also sell on unused credits. Limiting the supply of credits ensures that they have value, so the scheme rewards companies that invest to limit emissions.