ETS 'back on track' thanks to market stability reserve

MEPs have agreed to set up a market stability reserve to bolster the EU's emissions trading system.

By Julie Levy-Abegnoli

25 Feb 2015

Parliament has requested that the measure be implemented by December 2018 at the latest. The emissions trading system (ETS) allows businesses to purchase CO2 emission allowances. 

Unfortunately, too many allowances have been made available on the market. As a result, their price has dropped dramatically in recent years. They currently cost €7 to €8 per tonne, whereas it was originally hoped they could be sold for €30 per tonne.

A market stability reserve (MSR) would reduce the number of allowances on the market if there are too many, and introduce new ones onto the market in case of a shortage.

Ivo Belet, parliament's rapporteur on the establishment and operation of a market stability reserve for the union greenhouse gas emission trading scheme, commented that the vote was "a strong signal that [parliament] is serious about fighting climate change, while at the same time bearing in mind the concerns of industry - the reform approved proves that we can reunite ambitious climate change policy with jobs and growth".

"The reform approved proves that we can reunite ambitious climate change policy with jobs and growth" - Ivo Belet

Antonio Tajani, opinion rapporteur for parliament's industry, research and energy (ITRE) committee, announced that "300 million allowances will go to a special industrial innovation fund that will help industry adapt to low carbon technologies".

S&D shadow rapporteur Matthias Groote said the outcome of the vote was "the best compromise we could achieve", adding that "the ETS is one of the main pillars of EU climate policy and has the potential to inspire other regions in the world". 

He also highlighted that "the vote in the environmental committee sends a clear message towards the climate negotiations in Paris in December", when world leaders will convene capital at a UN summit on climate change.

Theresa Griffin, S&D spokesperson on ETS in the ITRE committee, explained that "developing a strong EU-ETS will enable us to create high quality jobs in green technologies, safeguard industries, reduce overall EU emissions and will promote a sustainable economy for years to come".

ALDE shadow rapporteur Gerben-Jan Gerbrandy was pleased that "[the EU's] most important instrument to fight climate change seems to be back on track. As long as there are too many allowances on the market, polluting will remain more lucrative than investing in clean technologies - that is the world turned on its head".

However, not everyone was satisfied with the agreement, with Greens/EFA shadow rapporteur Bas Eickhout saying, "nobody is disputing that the EU's emissions trading scheme is being crippled by an oversupply of emissions permits but, rather than fix the problem now, we are kicking the can down the road".

He went on to complain that "under [this] vote, the proposed MSR could only begin operation from 2019. By this time, the oversupply of emissions permits could be over two billion based on current estimates, meaning the ETS will continue to fail in its purpose of delivering domestic greenhouse gas reductions by encouraging investment in green technology".

Ivo Belet will now enter into negotiations with the member states.

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