Germany and the UK – two of the biggest voters in the EU council – are clashing on whether emissions allowances should be permanently cancelled in phase III of the EU emissions trading scheme (ETS), they have said.
This is one of the three frontrunners among the European Commission’s options for structural reform of the EU ETS, launched to overhaul the market as prices sag under an oversupply ( see EDCM 18 October 2013 ).
A spokeswoman for the UK Department of Energy and Climate Change (DECC) said the country is in favour of permanently removing an “ambitious volume of allowances to help restore the balance between supply and demand”.
In contrast, the newly formed German coalition government has said it opposes permanent EUA removal ( see 16 December 2013 ).
Market participants speaking to ICIS is said another of the options for structural reform floated by the Commission, a flexible reserve mechanism, could work as a compromise between the UK and German views.
The flexible reserve would hold back EU allowances (EUAs) during periods of oversupply and release them at times of higher demand.
The DECC spokeswoman said the UK would also favour a revision of the linear factor, to be aligned with long-term climate targets. Ben Lee