EU ETS – Environment Minister Hendricks Calls for Faster Reform

The representatives of the Permanent Representatives Committee (Coreper) adopted a negotiation mandate for reforming the European Emission Trading Scheme (EU ETS) paving the way for a trilogue between the Latvian Presidency, the EU Parliament and the Commission, German Environment Minister Barbara Hendricks informed. She welcomed part of the compromise but demanded a faster pace.

Mrs Hendricks said it was important that the trilogue started quickly. Besides it was important to her that the 900 million emission allowances that have been withdrawn from the scheme through so-called backloading would not be made available to the market again, but would be transferred directly to the new market stability reserve. Yet she was not fully satisfied with the result, Mrs Hendricks said. Germany would lobby in Brussels that the reform would take effect as early as possible.

An (in her view excessive) amount of more than two billion emission allowances currently prevents EU ETS to set proper incentives and thus jeopardised reaching national and European climate protection goals in a cost-efficient way, Mrs Hendrick’s environment ministry (BMUB) said. Backloading was only a first step to gain time for a structural reform, which the European heads of state adopted on 23/24 October 2014 by agreeing on a market stability reserve (MSR). Based on (predefined) rules this reserve can steer the annual budget (of allowances) auctioned in a given year. In case there is a surplus of allowances, a certain amount is withheld from the auctions and transferred to MSR. Conversely, allowances from MSR can be auctioned at times of great demand.

According BMUB, Coreper decided on the following key points with which the European Council will go into the trilogue negotiations

  • MSR for back-loaded allowances will be established in 2018; start of management of the amount of allowances as of 1 January 2021 (Last December, German Environment Minister Barbara Hendricks and thirteen of her European colleagues had advocated for a start in 2017);
  • Transfer of back-loaded allowances to MSR
  • The Commission was asked to review how to proceed with the remaining quantities from the third trading period (which runs from 2013 to 2020);
  • Shortening of the reaction time after an excess of allowances has been found to one year.

BMUB points out that the European Parliament had adopted a more ambitious position for the reform, advocating for a start of MSR in 2018, a transferal of the back-loaded allowances and remaining quantities into MSR, as well as an Innovation Fund (for more information, please see the first link below).

Source: Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety

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