More ambition is needed to restore ETS - stakeholders
Calls for greater ambition in measures aimed at fixing the emissions trading system persist, with the Climate Market & Investment Association (CMIA) proposing that the lifetime of surplus allowances should be capped, while the European Federation of Energy Traders (EFET) has said more coherent energy policy is needed to reduce the EU's emissions efficiently.
The European Commission adopted and published its report on potential structural changes on Tuesday (see EDCM 14 November 2012) in a bid to address the long-term crisis stemming from a vast surplus of carbon credits in the ETS, after having published its 900m EU allowance (EUA) back-loading proposal on Monday (see EDCM 13 November 2012).
While welcoming the proposals, the CMIA wanted more stringent action to be taken.
"In the Commission's recent consultation, CMIA proposed a back-loading figure of 1.23bn," CMIA executive director Miles Austin said in a statement released on Thursday, and added, "the Commission themselves acknowledge the size of the surplus, which continues to grow".
Of the proposed structural changes, the CMIA supports four out of six options: raising the bloc's current 20% carbon-reduction target to 30% by 2020; permanently removing allowances; increasing the annual rate at which emissions have to be cut; and including more industries in the ETS.
It highlighted the need for urgent action "as we have previously submitted to the Commission, CMIA estimates that, with current surplus emission permits, the EU ETS allows emissions to increase by 4% above 2005 levels [by 2020]".
Without outright erasing the surplus, the CMIA added, a 30% reduction target would only help offset the surplus slightly and cut CO2 by 6% against 2005 levels.
"In such conditions, there is a significant likelihood that member states will feel the need to implement other, more costly national policies to actually achieve this 30% target, instead of using the EU ETS."
Despite the need to cut the surplus, the CMIA opposed the mooted option of limiting international carbon offset credits in the ETS. The existing mechanism was "flawed", it said, as it does not cancel out EUAs against certified emission reductoins (CERs) or emission reduction units (ERUs) entering the ETS, thereby generating 75% of the predicted surplus.
Hence, the ETS needed a "surplus-control mechanism", the CMIA added, calling for a three-year life time limit to be set on accumulated surplus allowances.
"Crucially as the cap has already been agreed it would be utilising a preagreed environmental metric rather than a politically desired price level which feels a somewhat arbitrary approach," it added.
Lastly, the CMIA said that sellers should be able to set a reserve price at auctions.
Meanwhile, the European Federation of Energy Traders (EFET) also welcomed the proposed interventions in the ETS, but stressed that the back-loading should be "a one-off measure only".
EFET echoed the CMIA's calls for more ambition, recommending that the EU focus on carbon-reduction targets, in particular to ensure more policy "coherence" that also reflects energy efficiency and renewable energy policies, as well as formally adopting the 2050 Roadmap and a related 2030 carbon-reduction target. The ETS Directive should be revised by 2016, it added. MLDB
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