EU Parliament Backs Emission Allowance Freeze Under Tighter Conditions in Second Vote

In April the European Parliament (EP) had still narrowly rejected a proposal for boosting the emission allowance price and making low carbon investments more attractive by withholding around 900 million emission allowances from the EU emissions trading scheme (EU ETS). The European Parliament on Wednesday backed the motion under tighter conditions.

The EU ETS that was set up in 2005 has suffered from falling prices for emission allowances. Initial expectations that prices would range between EUR 20 to 30 for the right to emit one tonne of carbon dioxide (CO2) per permit have been disappointed as prices have fallen due to an initial oversupply and the economic downturn, reaching a level of EUR 4 to 5.

According to the proposal as approved by Parliament, the Commission “may, in exceptional circumstances” adapt the timing of auctions (termed “backloading”), 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”.

“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.

In the past, the German government’s opinion on the backloading proposal was split with Conservative Environment Minister Mr Altmaier already supporting the plan prior to the first vote and his Liberal cabinet colleague Economics Minister Philip Rösler opposing it for fear of rising carbon prices for the industry. Minister Altmaier welcomed Wednesday’s vote.

More background information on the EU ETS can be found in the European Parliament’s press release (please see link below) or on the European Commission’s website.

Source: European Parliament; Federal Ministry for the Environment, Nature Conservation and Nuclear Safety

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