Corrected: German ministry suggests 2017 ETS reserve start date

12 June 2014 17:04 Source:ICIS

This article has been corrected to say a Danish environment ministry official said transport should be included in the emissions trading system, not Dutch environment minister Wilma Mansveld as reported.

The German government has called for a 2017 start date for a market stability reserve, while many other nations backed reform of Europe’s emission trading system (ETS) during a meeting in Luxembourg on Thursday.

Environment ministers from EU countries met to debate the bloc’s 2030 climate and energy package. Reform of the currently oversupplied EU ETS through a proposed supply-stability reserve was also raised.

“We believe that a much earlier start of the mechanism before 2020, ie from 2017, is necessary” a translated statement from the German environment ministry read, making the country the first to lay a preferred start date on the table.

The ministry would also like the 900m EUAs temporarily delayed from auction under back-loading, a short-term carbon market fix, to go straight into the reserve. This would prevent the volumes coming back to market and pressuring prices.

Ministers from the Netherlands, Slovakia and Belgium aired support for the stability reserve at the meeting, adding to previous backing from Germany, the UK and France.

The European Commission had previously said it would not block an earlier start date to the reserve ( see EDCM 3 June 2014 ) and momentum is building among countries for carbon market reform.

A stability reserve is expected to be partly responsible for boosting currently flailing EUA prices. The benchmark contract could reach €48/tCO2e by 2030, according to analysts earlier this month, although only €40/tCO2e without the reserve.

The Dutch environment minister Wilma Mansveld on Thursday suggested that the ETS cap could be made more stringent. This would also support demand.

A Danish environment ministry official proposed that the transport sector should be included in the EU ETS, which a Luxembourg government official also backed.

Energy efficiency policy proposal on cards

The European Commission at the meeting hinted that an energy efficiency policy will be proposed soon.

“My colleague, [energy commissioner, Gunther] Oettinger, plans before the summer break to discuss the content of the energy efficiency policies”.

This could complement two additional 2030 targets proposed by the commission in January – to reduce the bloc’s greenhouse gas emissions by 40% on 1990 levels and ensure that 27% of energy comes from renewable sources.

The EU is expected to agree its position on its 2030 climate and energy targets in October, in advance of a global deal on climate which is anticipated in 2015.

Oettinger earlier this month expressed an interest in an energy efficiency target to be based on intensity, rather than absolute reductions ( see EDCM 3 June 2014 ). This could support EUA demand as an intensity target would not necessarily guarantee a cut in emissions.

EU countries are still not completely united on how many climate and energy targets there should be and on the level of ambition of the goals.

Some countries such as the UK and Germany would be willing for a higher cut than the proposed 40% emissions reduction target.

Germany also proposed a 30% renewables share of energy target, higher than the commission’s suggestion of 27%.

In contrast, a Hungarian government official at the meeting expressed an opinion that he only wanted an emissions reduction target. Other eastern European nations have historically not been keen to back ambitious climate targets.

Countries from across the EU – ranging from Belgium to Romania – backed adequate provisions of free allowances to industry, however, to prevent ‘carbon leakage’, a term for businesses relocating outside of the bloc to regions with less stringent climate laws. Ben Lee

By Ben Lee