UK joins EU nations backing early carbon market reform
The UK, along with eight other member states, have reiterated their call for “ambitious and early action” to reform the EU Emissions Trading System.
UK Energy Secretary Ed Davey has signed a joint statement with ministers from the Netherlands, Sweden, Denmark, Slovenia, Luxembourg, Malta and Norway, stressing the need for all sides to come together for an outcome that has majority support.
The EU ETS works as a ‘cap and trade’ system and is designed to cut pollution by making businesses pay for producing too many greenhouse gas emissions.
The letter suggests the EU ETS “is a cost-effective tool” but is calling for the European Commission to address some “critical issues”.
The ministers have welcomed the Commission’s recent proposals to introduce a new Market Stability Reserve (MSR) – which is expected to address the emission allowances that has built up and control the number of allowances in the market – but argues the nations can’t wait to launch the new mechanism until 2021 as currently proposed.
“By that time, the level of surplus in the EU ETS is likely to be significantly higher according to market analysts, with the resulting risk that critical low carbon investments needed this decade are further postponed into the future, increasing decarbonisation costs and further undermining confidence in the system. We therefore call for the MSR to start in 2017,” the letter states.
Under backloading, allowances are being removed but are due to return from 2019.
The ministers add the plan to return around 800 million carbon allowances to the market before the end of the decade could cause “substantial market turbulence, further undermining investor and wider confidence in the EU ETS”.
The letter states: “These allowances must either be put into the reserve or otherwise addressed to avoid damaging the credibility and stability of the EU ETS.”
The call comes as the European Parliament’s environment committee is due to make a decision tomorrow on when it wants the reformed ETS to start.
Last week the UK Energy and Climate Change Committee called for carbon trading to be linked between nations across the globe in the near future.