EU ETS faces ‘severe crisis’ if backloading gets no vote

A group of prominent environment ministers, including Secretary of State for Energy and Climate Change Ed Davey, have called on the European Parliament to support the implementation of backloading for the EU's Emissions Trading Scheme (ETS).

In an open letter the ministers said that it was crucial the European Parliament voted on Tuesday to withhold more than 900 million carbon credits from the next round of the cap and trade system, in a process known as backloading. 

The ministers claimed that the ETS had worked in the past but was facing “a severe crisis” because the current low CO2 price, which dropped below the €5 (£4.25) per tonne of CO2 earlier this year, (link) does not actively contribute to climate protection.

They argued that this had been mainly caused by the economic crisis, which as a consequence of lower production levels, had led to the unpredictable high surplus of allowances currently on the carbon market.

The signatories, who included Germany’s Minister for the Environment, Nature Conservation, and Nuclear Safety, Peter Altmaier and France’s Minister of Ecology, Sustainable Development, and Energy, Delphine Batho, said that a collapse of the ETS would lead to “new competitive distortions in Europe.”

The letter stated: “If the ETS lost its central role in Europe, Member States would possibly introduce more unilateral measures for climate protection in order to incentivise sustainable investments in their industries and to enforce their national climate targets.”

“We need an effective price signal from the ETS if we do not want to put our long-term climate targets at risk. Otherwise investments in non-sustainable, CO2-intensive technologies would lead to lock-in effects and would make the achievement of our long-term climate targets more expensive or even impossible.

In addition, the ministers claimed that an ineffective European ETS would set a negative example to countries such as China, South Korea and Australia which are beginning to implement similar carbon markets.

Conor McGlone

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