EU committee passes backloading compromise – but has the measure lost its teeth?
The price of emissions on the EU carbon market may heave itself out of the doldrums – at least for a time. An influential EU committee has just voted in favour of a new compromise measure that could see 900 million emissions permits held back from the market. But under the watered-down proposal, they’ll all be reintroduced much sooner than first planned.
The European Environment, Public Health and Food Safety (ENVI) Committee has just voted in favour of a measure that would remove permits from the EU Emissions Trading Scheme (ETS) – known as backloading. MEPs narrowly voted against an earlier version of the proposal in April. Originally, backloading was expected to remove this number of permits permanently – but the current version foresees that they will be reintroduced in a few years’ time.
Companies buy and sell permits to emit carbon dioxide in the ETS. If they emit less than their permits allow, they can sell the excess for a profit. The scheme is meant to reward those that cut their emissions, and it relies on a shortage of permits. But the economic slowdown meant the market became over-supplied, sending the carbon price sliding to record lows and removing the incentive for polluters to cut their emissions.
The emissions trading scheme has been in decline for months, with the carbon price hitting record lows earlier this year. Backloading is designed to limit the number of permits on the market, which policymakers hope will boost the carbon price. ENVI committee chair, Matthias Groote, proposed the amendments in the hope of getting backloading through parliament.
The amendments are intended to sweeten the backloading pill. They would ensure permits can only be withheld during phase III of the ETS – between 2013 and 2020. What’s more, if it is decided that backloading might lead to high-emitting industries moving overseas, then no dice – it won’t happen. Finally, the EU will be able to return all the allowances to the market – and will be able to alleviate the scarcity on the market much sooner.
While the original plan would see the permits withheld until the end of phase III, the new compromise says the allowances “shall be reintroduced in a predictable and linear manner”, starting from the year after the allowances are first taken off the market. In other words, the backloading period will work very differently from the way that was previously envisioned and there will be a lot more permits on the market much sooner.
Backloading cheerleaders like EU climate commissioner Connie Hedegaard have many reasons to feel a bit cheated by the current proposal. When backloading was first mooted, it was more or less agreed that the permits would have to be removed permanently from the market.
That they should be reintroduced at all was considered a significant compromise, and hoped to lead eventually to the permits being cancelled permanently. So the new proposal to reintroduce them even earlier than first envisioned might leave many wondering what the point is. Any temporary boost in the carbon price is likely not to worry Europe’s big emitters.
There is no great surprise in Brussels that the measure passed through the committee – it has already voted in favour of much more stringent attempts to resuscitate the emissions trading scheme. Unlike the European Parliament, it voted in favour of backloading when the measure had teeth.
The vote will now go to the parliament in early July. EU policy director, at the International Emissions Trading Association, Sarah Deblock, says it’s likely the parliament will OK the measure, or at least components of it, this time. Deblock adds that the compromise amendment will “ensure discussions will begin between the parliament and the European Council” on backloading.
But if MEPs turn their noses up at even this watered-down version, it’s not just the future of the ETS that will seem uncertain. It will also raise questions about the level of member states’ political will on climate policy.