MEPs back new EU ETS measures

Ambitious revisions to the European Union's emissions trading scheme (ETS) have cleared a significant hurdle after MEPs backed a raft of reforms.

Ambitious revisions to the EU ETS have cleared a significant hurdle after MEPs backed a raft of reforms | Photo credit: Press Association

By Martin Banks

Martin Banks is a senior reporter at the Parliament Magazine

15 Dec 2016

The vote in Strasbourg includes a number of important measures aimed at strengthening the EU ETS, such as doubling the intake rate of the market stability reserve (MSR), which is a 'bank' to soak up and store excess allowances, to 24 per cent (2019-2022).

There will also be an increase in what is called the linear reduction factor and cancelling 800 million allowances from the MSR in 2021.

The linear reduction factor (LRF) - which is the annual cut in carbon from 2021-30 - will be increased from 2.2 per cent to 2.4 per cent, which puts the EU on schedule to meet its long-term 2050 emissions reduction target of at least 80 per cent reduction of CO2. 


Members of the Parliament's environment, public health and food safety committee approved the changes contained in a report authored by UK deputy Ian Duncan by an overwhelming majority and it is now expected to be considered by all MEPs in February.

ETS is the cornerstone of the EU's policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively. The first, and still by far the biggest international system for trading greenhouse gas emission allowances, the EU ETS covers more than 11,000 power stations and industrial plants in 31 countries.

The outcome of the vote on Wednesday was hailed by Duncan and others but was greeted with dismay in other quarters.

Corporate Europe Observatory's climate policy researcher Belén Balanyá said ETS had taken "another step closer to handing out billions in free pollution permits to polluters."

She said, "The proposed emissions trading reforms would continue to hand billions of euros in carbon welfare to some of the continent's biggest polluting industries. It's scandalous that the EU's main climate policy is to prop up polluters rather than encouraging a low-carbon transition."

However, Duncan said the committee had "delivered a welcome Christmas gift to all who care about climate change."

He said, "We have endorsed an agreement that honours our Paris commitments, while also protecting our vital industries. The journey has not always been easy but the commitment of my fellow MEPs who negotiated the dossier has been unstinting and I owe them all a debt of thanks."

His proposals, he said, will heighten ambitions to tackle climate change.

In order to tackle the glut of allowances in the market - essentially permissions to pollute that industries can buy and sell - up to one billion allowances will be cancelled. 

Duncan added, "These measures will help deliver an effective carbon price that incentivises industry to innovate. The top 10 per cent best performing factories and other installations will receive all of their allowances free.  

"We have also created a fund of up to €12bn to help industry innovate and invest in lower technology."

The report, he believes, is a balance between delivering a functioning market with a meaningful carbon price and aims to avoid  so-called "carbon leakage" - the relocation of industries to countries outside the EU with less stringent climate change targets.

Duncan added: "The next step will be to try and secure endorsement by the entire Parliament, which will be a challenge of course. But after today's vote I have greater confidence in the outcome. Time now for the European Council to step up to the plate and get ready to bat for climate change." 

Further comment came from Ivo Belet, who is the EPP group shadow rapporteur on the file and who said, "We want a balanced reform of the ETS - the necessary ambitions to guarantee the implementation of the Paris agreement, while at the same time, sufficient protection for those industrial sectors that are exposed to fierce international competition. 

"These guarantees are included in the package adopted by the environment committee. It strikes the right balance between climate efforts on the one hand, and jobs and competitiveness on the other hand."

EURELECTRIC Secretary General Hans ten Berge also welcomed the vote, saying it "puts the EU on track to implement necessary reforms to the EU ETS that will reinforce it as the cornerstone instrument of the EU's climate and energy policy."

He added, "As a strong supporter of the EU ETS as a key driver for market-based investments in low-carbon electricity generation, we welcome the outcome of this vote which is an important step towards delivering a credible carbon price in the short and longer term."


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