European Parliament votes for early carbon market reform
The European Parliament has endorsed plans to reform the Emissions Trading Scheme (ETS), it was announced yesterday (8 July).
The Parliament voted 495 to 198 in favour of measures intended to reduce the surplus of carbon credits available to ensure the correct price of carbon - bringing the move forward to 2019, two years earlier than originally planned.
MEPs argued a glut of around two billion excess carbon allowances had accrued, undermining the EU’s emissions trading system.
The planned reform will introduce a Market Stability Reserve (MSR) to reduce the surplus credits and increase the price of carbon. The law will take a portion of ETS allowances out of the market and place them in a reserve.
The measure had been resisted by some Polish MEPs whose nation depends heavily on its coal.
Belgian EU environment committee MEP Ivo Belet said: “The MSR is an efficient, market-driven tool that will stabilise our ETS system and thereby save the central pillar of Europe's sustainability and climate policy. MSR is a crucial building block to help ensure that CO2-prices spur innovation in the field of energy efficiency.”
He added the Parliament would need to ensure sufficient safeguards for energy-intensive industries in order to stop them from leaving Europe for areas with fewer climate policies.
Responding to the news, Liberal Democrat MEP Catherine Bearder said: “This crucial reform will give a boost to green investment and reduce our reliance on imported fossil fuels. Europe has the world's first and largest carbon market, fixing it gives an important signal as we approach global climate talks in Paris later this year."
The vote had been largely expected following a series of calls from green groups and industry. Before the vote, the European Wind Energy Association (EWEA) said the ETS was in need of a major reform throughout. EWEA chief policy officer Kristian Ruby said: “The removal of surplus permits and the elimination of free allocation would be the first steps to achieving this.”
The EWEA called on the European Parliament to introduce further reforms post-2020 changes to drive members towards renewable energy generation.
"Putting measures in place to phase out the most polluting assets in Europe should be a top priority in this reform, particularly for those Member States in Central and Eastern Europe that rely heavily on coal-fired generation,” added Ruby.
"Already we see that wind energy, particularly onshore, represents the strongest business case for European countries trying to balance decarbonisation pledges with economic competitiveness and growth.
“With a functioning ETS and a robust carbon price, we can speed up Europe's energy transition and reach our goals in a more cost-effective manner."
The ETS covers more than 10,000 of Europe’s most polluting power plants and factories, however the growth in renewable energy led to a 4.4% fall in their emissions in 2014.
This new legislation will first have to be approved by the Council of ministers before it comes into effect.