Brussels, 27 February – In advance of tomorrow’s meeting of the European Union’s Environment Council, IETA calls on EU Environment Ministers to strengthen the EU’s carbon market while protecting competitiveness of European industry.
“We urge the Ministers to agree to a balanced approach that strengthens the EU’s carbon market while safeguarding the competitive strength of European industries and their workers” said Dirk Forrister, CEO of IETA.
IETA recommends the EU Parliament and the Council agree to a combination of the following measures:
- an increase of the intake rate of the Market Stability Reserve from 12% to 24% for a maximum period of five years;
- a moderate decrease in the share of permits sold at auction, of up to 5 percent, in the event that the cross sectoral correction factor were to be triggered.
- adequate compensation for indirect costs through coordinated arrangements at Union level and, if necessary, additional compensation by Member States;
- free allocation of allowances only to sectors at risk of carbon leakage;
- close monitoring of the functioning of the EU ETS, including interactions with other Union climate and energy policies.
“Doubling the Market Stability Reserve’s withdrawal rate for a maximum of five years must go hand-in-hand with up to a 5 percentage point increase in free allocation available to sectors at risk of carbon leakage as well as with compensation for indirect costs handled through coordinated arrangements at Union level” said Julia Michalak, IETA’s EU Policy Director.
“The current EU carbon market reform occurs at an important time, when many other jurisdictions – from China to Canada, California, Mexico and Korea – are developing their own market based systems to contribute to progress under the Paris Agreement,” said Forrister. “The reforms will shape the EU ETS for the next decade, when we expect market mechanisms to become the main pricing tool countries use to deliver their climate objectives. This reform will help improve the EU market’s readiness for the future of globally linked carbon mechanisms.”
The IETA statement on review of the EU’s carbon market can be found here.
The statement is complementary to IETA’s views on the European Commission’s revision of the EU ETS Directive for the post-2020 period.