EU ETS: backloading must be the first step towards more ambitious structural changes

Tomorrow the Parliament is to vote on a proposal from the Commission to set aside a number of allowances (known as ‘backloading’) to ensure the well functionning of the EU carbon market.

The ETS market is currently flooded with surplus allowances and the suppression of 900 million allowances from the beginning to the end of phase 3 (2013-2020) - while clearly not being sufficient - is absolutely necessary to prevent the current system from collapsing.

Carbon prices plunged to record lows earlier this year and are therefore unable to either spur green investment or encourage industry to seriously reduce its emissions. The Greens, who had called for a total of 1.4 billion of emissions permits to be suppressed and the climate target to be raised from 20% to 30% at least, reckon that the decision is only a first step towards a better functionning of the EU ETS and that more ambitious structural measures will be necessary in the near future.

The fact that the EU ETS is not delivering is also very much due to the lack of ambition of policy makers which have refused to make it work. The problem is not technical but political. Decision makers can make it work if they really want to. In the past, the Greens/EFA group had already warned about the overgenerous polluting permits that were given for free when the system was designed and implemented in the first phases. Despite these warnings, the majority of decision-makers decided to listen to lobbyists and gave them an exaggerated number of allowances for free, which then resulted in many big companies making huge profits on the back of consumers (the so called ‘carbon fat cats’).

The EU must now be consistent and take the necessary decisions to ensure that the system functions, especially at a time when it is serving as a model in many countries across the globe (including in China, South Korea and Australia – which plans to link its own system with the EU ETS in 2018!).

While not sufficient, backloading is the first step towards fixing the ETS and should therefore be supported as there is no other alternative to this system for the moment. The Greens therefore call for these permits to be suppressed. They also ask that the EU goes beyond its current 20% emissions reduction target by 2020 so that it is compatible with the 2°C objective and that the EU institutions support an ambitious energy and climate package for 2030.

In less than three years, the world is to agree on an international climate treaty. To ensure that the EU’s voice will be heard, there is no time to lose in putting their emissions trading system back in order.

 

Download our Green guide on the EU ETS here for more details.