NRW Minister of Economy Opposes Backloading of Emission Allowances

North Rhine Westphalia’s Minister for the economy Garrelt Duin (SPD) rejects backloading and therewith opposes the position of the Social Democrats in the European Parliament. The discussion about backloading is ongoing and intensifying as the EP passed a motion in that regard in July.

Duin opposes plans of the European Commission to boost the prices of emission allowances by withholding around 900 million emission allowances from the EU emissions trading scheme (EU ETS).

The EU ETS was established in 2005 and since has suffered from falling prices for emission allowances over the last few years. 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. Instead, in the face of the economic crisis of which most European states are still recovering, and the increasing role of renewable energies the prices dropped rapidly and currently level at about EUR 5. The Commission argues that action has to be taken to boost the allowance price, as the low price does not create sufficient incentives for companies to invest in new energy-efficient technologies and the modernization of old power plants.

Mr. Duin, however, argues that the ETS was created as an emission market and that low prices are the result of market developments with which the European Commission should not interfere. Moreover, low prices do not change the effect of the EU ETS to cut carbon dioxide emissions according to the goals which had been agreed upon by the member states. Mr. Duin states that if the EU interferes with the emission market in a way that guarantees higher prices for emission allowances, the EU could simply fix the prices by statute and give up the market system.

However, Mr. Duin’s position is contrary to the position of the Socialdemocrat’s in the EP, which carried the according motion through the EP led by rapporteur Matthias Groote, a SPD-MEP from Lower Saxony. After the EP passed the motion on backloading the plans were handed to the line ministers of the member states to decide on the motion. EP rapporteur Matthias Groote stated: “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.”

The reason for such differing positions is most likely Duin’s heritage: As the minister for the economy of North Rhine-Westphalia, a state in which most of Gemarny’s energy intensive industry as well as most of Germany’s coal-fired power plants are based, Duin wants to secure the competitiveness of these industries and the related jobs in North Rhine Westphalia. These industries already currently are suffering from the consequences of the German Energiewende which results on the one hand in high energy prices for industrials and on the other in low margins for coal-fired power plants.

However, Mr. Duin is not the only voice rejecting backloading. The Center for European Politics in Freiburg (Germany) analysed the issue and has risen the same concerns as Mr. Duin. Also the outgoing Federal minister for the economy, Phillip Rösler (FDP), and the Federation of the German Industry, BDI, have opposed backloading, in contrast to the Federal minister for the environment, Peter Altmaier (CDU), who is in favor of backloading.

As currently it seems most likely that the new Federal Government will be formed by Christian and Social Democrats, and leading North-Rhine-Westphalian Social Democrats are said to play an important role in the negotiations about the new Federal Government’s agenda, and a lot of Christian Democrats are concerned about the negative effect of the Energiewende on German industry, it will be interesting to see how the position of the new Federal Government will evolve.

Sources: energate,  European Parliament, European Commission, EU ETS, Tagesspiegel, EEX EU Emission Allowances, Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Federal Ministry for the Economy and Technology

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