Before a summit of EU leaders next week on strengthening the bloc’s economy, talks are heating up on reforming the Emissions Trading System (ETS), a key tool to curb greenhouse gases.
Less than three years after tightening the market in a green push, governments are ready to slow the pace of pollution cuts and consider measures that would alleviate industry costs, according to EU policymakers and diplomats with knowledge of the issue.
The details of the planned overhaul, which will impact supply and demand in the market, are due to be unveiled by the European Commission later this year and are expected to trigger intense negotiations among governments.
Slovakia’s prime minister Robert Fico has already called for a suspension of the ETS and his Czech counterpart Andrej Babis wants steps to curb price swings. Carbon futures fell as much as 4.6pc yesterday, the lowest since November 10.
“The EU narrative has shifted from aspirational targets to implementation and execution, from idealism to pragmatism,” said Ingo Ramming, head of carbon markets at Banco Bilbao Vizcaya Argentaria SA in Madrid.
All the attacks on the ETS to destroy it or put it on hold are completely irresponsible
With the EU reassessing its long-standing partnership with the US, trying to stave off increasing competition from China and seeking to boost defence spending after the Russian invasion of Ukraine, the ambitious green transition has slipped down the political agenda.
The broad consensus on climate action that prevailed five years ago has fractured, giving way to trade protectionism and policies that prioritise lowering energy costs.
In December EU negotiators agreed a new interim goal to slash emissions by 90pc by 2040 from 1990 levels and also signalled that 10,000 installations in the ETS should have more time to decarbonise. That will avoid the caps dropping to zero in 2039 under the current design of the cap-and-trade system, one of the key guidelines for the forthcoming market reform.
“All the attacks on the ETS to destroy it or put it on hold are completely irresponsible,” Peter Liese, a German member of the EPP – the biggest political group in the EU Parliament – said in an interview. “But changes are needed and we can ease the pressure for companies without risking our climate targets.”
The commission declined to comment on the details of the overhaul.
The rising political sensitivity to carbon prices has been highlighted in the December talks on the 2040 climate goal, when the EU agreed to postpone the start of a new carbon market for road transport and heating fuels.
European climate and energy policies are set to be among the issues discussed by EU leaders at their informal gathering in Belgium on February 12. During a meeting of ambassadors in the run-up to the summit, many countries signalled concerns that carbon prices undermine EU competitiveness.
(Bloomberg)
source