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8th May 2021

MEPs call for emissions trading reform to start in 2019

  • The carbon market is suffering from a glut of allowances (Photo: EUobserver)

The environment committee of the European Parliament on Tuesday (24 February) voted to introduce a market mechanism for the EU's struggling emissions trading system at the end of 2018.

The date was the subject of much wrangling among MEPs and national governments with European Commission having originally proposed 2021.

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A majority voted to adopt a deal that was struck by the two largest political groups saying that “market stability reserve is established in 2018 and shall operate by 31 December 2018”.

The Green group, which wanted an earlier year, criticised the deal saying MEPs had caved into pressure from energy intensive companies.

The market intervention would regulate the number of allowances in the carbon market, which is currently suffering from a glut, driving down prices.

The low price means companies have little incentive to look for cleaner energy alternatives.

On Monday, environment ministers from eight EU countries, including the UK and Germany, signed a letter calling for a 2017 starting date.

But there is a “blocking minority” opposed to an earlier date, said one EU contact.

According to carbon price analyst Stig Schjolset, the fact that there is political consensus about the need for a market stability reserve is more siginificant than its start date.

“It's obviously good to start as soon as possible, but whether the final compromise will be 2018 or 2019, doesn't really make a huge difference according to our model”, said Schjolset in a briefing to a group of journalists last Friday (20 February).

“The most important thing is that we will get an MSR in one shape or the other. Without the MSR, this market would be dead, with very low prices for the next ten to fifteen years.”

Representatives from the member states, European Commission and parliament will now continue negotiations on the date, with the final deal needing backing of the both the council and the European Parliament.

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