Germany’s newly formed coalition government, backs the European Union’s solution to the crisis in its carbon market at least in the short term.
However, a document shows that while it supports the back-loading plan to delay the sale of 900 million carbon emission permits, the German government will oppose any move to cancel them permanently.
Chancellor Angela Merkel’s conservatives have just clinched a coalition deal with the Social Democrats that puts Germany on track to have a new government in place by Christmas following two months of negotiations.
Reuters Newsagency reports that according to the 185-page document, the coalition appeared to reject any additional move to cancel permits under the Emissions Trading Scheme (ETS).
“It must be ensured that back-loading is a one-off intervention in the system and that certificates are not permanently withdrawn from the market and there are no adverse effects to the competitiveness of affected sectors or industry jobs,” the document said.
The EU administrative body the European Commission proposed back-loading as a quick-fix measure to incentivise companies to invest in green technologies by propping up prices that have plunged to near-record lows below €5.
EU politicians have agreed on back-loading and are expected to formally sign off on the bill next month.
Analysts expect back-loading to push prices into double figures in the ETS, which regulates around half of EU greenhouse gas emissions by forcing companies to surrender one permit for every tonne of CO2 they emit.
Reuters reports without further reform, the permits are due to return to the market at the end of the decade, potentially sending prices down to current levels.
A permanent cancellation of the back-loaded permits is one of three options the EC is considering proposing in January and has been strongly supported by Britain.
It would need to be agreed by the European Parliament and the council of member states in a legal process that could take up to two to three years.
“The coalition document is not binding on the government, but the wording is clear and does not allow much room for interpretation,” said Marcus Ferdinand, an analyst at Thomson Reuters Point Carbon.
“Given that Germany is an important member state, when it comes to decision-making procedures on the European level, I would see chances for a permanent cancellation being lowered with the adoption of the coalition contract,” he added.
The document also said the coalition was committed to an EU move to cut its overall greenhouse gas emissions by at least 40 per cent by 2030, in line with a level suggested by the EU and backed by France and a handful of other member states.
