EU must limit carbon permits, says Corporate Leaders Group
The European Union Emissions Trading Scheme (EU-ETS) must be reformed to include a Market Stability Reserve (MSR) by 2017 at the latest, to keep the continent on track for developing a low-carbon economy.
That's the view of the Prince of Wales's Corporate Leaders Group on Climate Change (CLG), which represents European business leaders from the likes of EDF, Shell and Unilever. The group has written to MEPs, supporting the MSR mechanism that would control the number of carbon allowances in the market.
The EU-ETS is a 'carbon permit' system that sets a cap on the total amount of greenhouse gases that can be emitted by the 11,000 participating factories and power stations across Europe.
EU Allowances (EUAs) for emissions are then auctioned off and can subsequently be traded, with each EUA representing one ton of CO2 that the holder is allowed to emit. Installations must monitor and report their CO2 emissions, ensuring they hand in enough allowances to the authorities to cover their emissions.
The CLG wrote: "We believe that establishing an EU-ETS Market Stability Reserve (MSR) by 2017 with 900 million backloaded allowances put directly in the Reserve from the outset, will rebalance the emissions allowance market, strengthening the carbon price and giving the right signals to investors and industry to effect the necessary transition to a low-carbon economy and energy system."
The 900 million allowances were removed from the system in 2013 and backloaded for 2020 after surplus allowances reached 2 billion.
The CLG letter concluded by saying: "We are convinced that the above reforms will provide the basis for meeting Europe’s 2030 commitment of at least 40% GHG emissions reductions and will put us on the road towards our 2050 goals of 80-95% GHG emissions reductions.
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Emissions analysts from ICIS Tschach Solutions released their own analysis this week, which drew similar conclusions.
"By having a strong effect earlier, a 2017 MSR that includes a direct transfer of back-loaded allowances to the reserve makes it easier for the EU to achieve the emissions reductions it aims for by 2030," said analyst Philipp Ruf
"Moreover, by providing greater price stability, it provides a much friendlier, more predictable environment for companies to invest in low-carbon technologies -- allowing further reductions in turn."
The CLG has previously been vocal in calling for international-scale emissions regulation - last year, the group mooted a plan for global zero-net emissions at the Lima climate talks.