Reserve talks aim to tie up loose ends on compensation

EU countries and the European Parliament will thrash out remaining disagreements over proposed compensation funds as part of a market stability reserve deal, according to a lead politician from the parliament, although an agreement is increasingly likely.

The Council of the EU’s permanent representatives committee agreed on Wednesday to enter talks on 5 May with the parliament and European Commission with the negotiating stance for the market stability reserve to start by 1 January 2019 (see EDCM 29 April 2015).

The reserve is a proposed buffer mechanism to better regulate supply in the oversupplied EU emissions trading system.

The council has aligned with the parliament environment committee’s recommendation for when the reserve should start. The commission originally proposed a 2021 beginning.

“On a few important issues, the council has moved towards parliament,” Gerben-Jan Gerbrandy, member of European Parliament (MEP) and one of seven parliament politicians responsible for guiding the stability reserve file, said on Thursday. “It’s becoming more and more likely we can strike [a] deal.”

However, another lead MEP, Matthias Groote, said on Twitter on Wednesday that “an agreement is not a given”.

Sticking points remain over an innovation fund, solidarity mechanism and unallocated allowances, Gerbrandy added.

But there are no obstacles that should be insurmountable, a third lead MEP on the reserve file, Ian Duncan, said on Twitter on Wednesday.

Horse trading not over

Some of the less wealthy states in the EU are keen to secure financial compensation for the expected higher carbon prices under the reserve.

The parliament has called for an innovation pot funded by EUA sales to encourage low-carbon projects in industry. However, the council reached no agreement on this on Wednesday.

“That is something from the parliament’s side we are willing to do something about,” Gerbrandy said. “These are negotiations. It depends on what you get back.”

Other areas for debate include how to deal with the solidarity mechanism and whether unallocated allowances go directly into the reserve, Gerbrandy said. The solidarity mechanism currently provides certain countries with additional EU carbon permits to auction.

Blocking minority diminished

The current Latvian presidency of the council is hoping that talks with the parliament and commission will be wrapped up during the meeting on Tuesday, with no further negotiations necessary.

“To reach yesterday’s compromise many member states came close to their ‘red lines’ and further discussions could only trigger new red lines,” a spokesman from the Latvian presidency said on Thursday.

Eight mainly eastern European states, led by Poland, held a blocking minority until Wednesday against an earlier reserve start date.

However, the Czech Republic defected and was joined by Lithuania, the environment ministry in Vilnius confirmed in a statement on Thursday, further diminishing the blocking minority’s strength. ben.lee@icis.com