Germany is opposed to the permanent cancellation of EU allowances (EUAs), it emerged on Tuesday night as the main political parties CDU/CSU and SPD agreed on a coalition contract.
This puts Europe’s most powerful country at odds with the European Commission, which has already picked permanent retirement of surplus EUAs from the EU emission trading system (ETS) as one of its three favoured options for recalibrating the bloc’s carbon market ( see EDCM 18 October 2013 ).
The agreement also adds that “corrections” to the system can only be justified if the bloc fails to meet its the emission reduction goals, instead of acknowledging that the economic crisis has already dented CO2 output and opened the door for greater ambition regarding future targets.
However, it states that as the coalition wants an effective EU emisson trading system (ETS) it endorses the one-off proposed backloading of 900m certificates.
Last month, a government advisory council said Germany should introduce a carbon tax if other measures to strengthen the price of emission certificates could not be realised, although traders doubt there is a political will to do so ( see EDCM 21 October 2013 ). Marie-Louise du Bois