Yesterday in the Environment Council, the EU member states agreed on a common position on the reform of the ETS. Federal Environment Minister Barbara Hendricks commented:
"After tough negotiations we have achieved a lot with respect to our two key demands. Firstly, we managed to substantially increase the environmental benefits of emissions trading. Therefore, it becomes more attractive to invest in climate action. The days of a huge surplus of allowances will soon be over. Secondly, we were able to protect the European industry against unfair competition. It would be counter-productive to climate action if our European industry were to produce elsewhere with the same or an even higher CO2 level. The two issues both provide a solid basis for the upcoming negotiations with the European Parliament."
The Council aims to increase environmental benefits through emissions trading. The plan is to shift twice as many surplus allowances into the reserve and thus retire them from the market. Another new element is to cap the reserve - carbon allowances are permanently cancelled when they hit a certain ceiling. The result is that the market faces scarcity earlier, which makes investment in climate action more rewarding. In view of the cancellation of allowances, market participants can assume that the very large surpluses of the past will not be generated in the future.
With this plan, the industry, facing international competition, is being protected effectively. The amount of allowances handed out for free could increase by up to two per cent in order to prevent the correction factor. Technical progress will from now on be presented in a more realistic way as part of the emission benchmarks for individual sectors. Pursuant to the Council’s position, the annual minimum reduction level amounts to 0.2 per cent.
Nothing has been decided yet. On this basis, the EU Presidency (Malta at present) will negotiate the reform with the European Parliament.