Wednesday

6th Jul 2022

Poland against quick rescue of emissions scheme

  • Coal is still a widely used energy source in Poland and other Central and Eastern European countries. (Photo: Wikipedia)

A simmering disagrement between member states about when to start a market stability reserve for the bloc's struggling emissions trading system has been taken up a political notch by Poland.

Polish PM Ewa Kopacz has written to European commission president Jean-Claude Juncker asking that the market intervention mechanism only kick into place in 2021.

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The letter, signed Wednesday 25 February, came the day after MEPs in the environment committee agreed the scheme should go into place two years earlier.

The letter was also signed by the leaders of Bulgaria, Croatia, Cyprus, Czech Republic, Hungary, Lithuania, and Romania.

The start date matters because the sooner the reserve starts operating, the sooner the carbon price is expected to rise. This will predominantly effect economies with many fossil-fuel reliant industries.

Poland, for example, is the member state most dependent on coal - the most heavily polluting fossil fuel - in the EU.

Meanwhile, countries less reliant on coal have been lobbying intensely to have the system begin in 2017. Environment ministers in Denmark, Germany, Luxembourg, Malta, the Netherlands, Slovenia, Sweden, and UK urged for the earlier date in a joint letter.

The market mechanism, once in place, would temporarily take out permits from the carbon market, if a certain number of permits was reached. The market is currently suffering from a surplus which drives down prices.

Low carbon prices mean there is less incentive to look for low-carbon alternatives to fossil fuels.

Kopacz listed five potential consequence that she fears an early MSR introduction will have, including an "impact on electricity prices, ... influencing the budget revenues from the auctioning of emission allowances, ... [and] weaker competitiveness".

She accused the commission of failing to "specify the possible scale" of these problems combined with "placing backloaded allowances directly into the reserve”.

'Backloaded allowances' refers to a batch of 900 million permits that have been temporarily been put aside, but which under current rules must be put back into the market at some point.

Following the environment committee's vote, representative from the parliament, the council and the commission will try and thrash out a compromise.

Kopacz wrote that she "expects the European Commission would confirm its coherent position and in the end stick to its own proposal" with the commission itself having orignally suggested 2021.

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