In a move that could propel carbon prices higher in the near term four European Union environment ministers have urged the bloc to reform the EU Emissions Trading System (ETS) sooner than the 2021 start currently proposed.
In January, the European Commission proposed a so-called market stability reserve for the ETS to help drive up prices to encourage more investment in low-carbon technologies and meet long-term emission targets.
Reuters Newsagency reports the measure follows the shorter-term back-loading plan and is aimed at enabling the ETS to adjust better to economic changes.
This would be done by creating a buffer of carbon permits from 2021 that would hold or release permits depending on market balance.
At near €7, carbon is well below the €30 levels hit in 2008 because rigid rules meant governments handed out too many permits, creating a surplus of more than two billion units.
“These proposals are also to be welcomed in principle. Germany is of the opinion that a sustained strengthening of the ETS is needed and we need it earlier than 2021,” German Environment Minister Barbara Hendricks said.
Her counterparts from Britain, Denmark and Sweden made similar calls during a EU meeting in Brussels, in the first ministerial discussion of the proposal.
Reuters reports the ministers were also among a larger coalition of 13 environment ministers from mainly western member states to sign a more general statement saying the ETS “continues to require urgent and significant strengthening”.
The 13 states would still need additional support to reach a qualified majority of member states and European Parliament needed to enact the measure in a legislative process expected to take around two years.
Analysts predict the reserve could add €11 to carbon prices to average €34 over the next decade.
However, that plan is likely to face opposition from heavy industry and mainly east European states over concern that higher prices will hamper the bloc’s economic recovery.
Regulating around half of Europe’s greenhouse gas output, the EU ETS forces more than 12,000 power plants, factories and airlines to surrender a permit for every tonne of carbon dioxide they emit.
Enacting reforms that take effect before 2020 could also raise legal concerns as politicians have already been agreed on ETS rules until 2020.
Both Britain’s climate minister Ed Davey and his Danish counterpart Rasmus Helveg Petersen backed a permanent cancellation of surplus permits.
“I would like to see a substantial cancellation and there are other countries that agree with me,” said Mr Davey on the sidelines of a meeting of the 13 ministers, who call themselves the Green Growth Group.
Reuters reports he declined to say which countries were in favour.
Mr Helveg Petersen said the reserve proposal should be altered to ensure it had a real impact on carbon prices.
He said this could be done with “earlier implementation, greater transfer of quotas to the reserve, and stricter rules for returning the permits to the market.”
The 13 environment ministers signing the Green Growth Group statement were from Belgium, Denmark, Estonia, Finland, France, Germany, Italy, Netherlands, Portugal, Slovenia, Spain, Sweden and United Kingdom.
