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Ministers demand ‘yes’ vote for EU ETS backloading plan

July 1st, 2013

Energy ministers from 12 European Union member states today issued a joint statement calling for MEPs to support backloading of the EU Emissions Trading Scheme.

A vote will take place on Wednesday on whether to proceed with proposals to allow backloading – a delay in auctioning 900 million allowances. An earlier vote on April 16 ended in a ‘no’ vote.

The backloading plan is on the table because the EU ETS is currently awash with surplus allowances – almost 2 billion according to the European Commission.

This has been caused by a combination of factors: a fall in demand for allowances due to the economic slowdown, weak rules in the earlier phases of the ETS and a flood of international credits into the system at the start of Phase III, which began this year.

The result has been significant fall in the carbon price over the last 12 months to around €5 a tonne, when it was originally envisaged to be between €20 and €30 a tonne.

There are fears that further introductions of carbon credits under Phase III – which runs until 2020 – will see the price plummet further.

Today’s joint statement is signed by the energy ministers of Denmark, Estonia, Finland, France, Germany, Italy, The Netherlands, Portugal, Slovenia, Slovakia, Sweden and the UK.

The ministers say they are committed to the EU ETS “as being at the heart of the EU’s climate change and low carbon investment policies up to and well beyond 2020”.

However, they state: “We remain deeply concerned that the ETS as currently designed cannot provide the price signals needed to stimulate the low carbon investment needed now, because the supply of allowances substantially outstrips demand, leading to a very low carbon price. This also threatens the credibility of carbon markets as the most flexible, cost-effective way to achieve emissions reductions.”

They say that “targeted interventions may be necessary and we are convinced that only through proper structural reform and by giving investors a clear signal on Europe's low carbon ambition beyond 2020 can the EU ETS be restored to its original purpose of driving down carbon emissions and stimulating low carbon investments”.

Although they stress that market interference should be kept to a minimum, they stress that “a one-off and targeted intervention now would minimise market uncertainty and distortions, and also promote investment in low carbon technologies”.

And they warn that any delay “could lead to greater costs in the long-term to meet EU 2050 objectives”.

The joint statement was initiated by the UK energy secretary Ed Davey (pictured), who said: “A twin track approach to ETS reform is critical. Backloading is an important short-term measure to help stabilise the system and to buy time for legislation, which should come out by the end of the year, to deliver structural reform to the ETS.”

He said that there had been “all sorts of unsubstantiated claims about the potential costs of backloading” but added: “The reality is that the ETS is the most cost effective tool we have.

“Without the ETS, Europe will likely revert to a disjointed and fragmented array of national measures which will be far more expensive for industry and consumers alike.”

The ministers’ support for backloading has been endorsed today by 41 players in the European energy market, including Alstom, E.ON, Iderdrola, Eurelectric, Gamesa, Vestas, Enel, Verbund, SSE and Areva.

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EU ETS in turmoil as backloading plan rejected.

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