The EU proposed Wednesday a tweak to its flagship carbon market scheme to reduce price volatility in preparation for a broader review later this year, as some countries complain about costs for industry.
Brussels has been under pressure to make changes to its Emissions Trading System (ETS), which was first set up in 2005 to help tackle climate change, as the 27-nation EU pushes to boost industry and bring down high energy prices.
The scheme has heavy polluters pay for the greenhouse gases they emit, obliging them to buy allowances that are capped in number, sold in auctions, and tradeable.
The European Commission moved Wednesday to make more allowances available in the future if high demand for them were to cause a spike in prices.
For the past two decades, supply has largely outstripped demand — generating surplus permits. Some of these are stashed into a reserve, and others are invalidated.
Forecasting a trend reversal, as the number of available allowances is gradually reduced, the commission proposed that all unsold permits be kept as a “buffer” and the invalidation be stopped.
The change will allow the EU to better respond “to future market developments, including potential tightness in supply in the coming decades,” the commission said.
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The proposal comes as EU chief Ursula von der Leyen this month promised updates to the ETS, including “a more realistic trajectory” for cutting emissions and the allocation of “free emission allowances” — currently set to be phased out by 2034 — “beyond 2035”.
Critics of the system, including some within European industry, have been pushing for a greater overhaul, arguing ETS contributes to high energy bills, as gas-fired plants need to pay up to cover their planet-warming emissions.
Their calls have grown louder since the Iran war sent energy prices soaring, and a review is due later this year.
AFP
