EU settles future of Emissions Trading Scheme

EU member states have reached a deal on the future if the EU Emissions Trading Scheme. The deal includes plans to double the so-called ‘Market Stability Reserve’, by which allowances are removed from the scheme in etc event of oversupply, helping stabilise the price of allowances.

“Investors across Europe have received the much needed legal clarity that will enable them to take better informed decisions on low-carbon investments,” said  Kristian Ruby, secretary general of Eurelectric, the energy suppliers lobby group. “The deal sends a timely message of EU climate leadership that coincides with the ongoing COP23 climate conference in Bonn. It also restores confidence in the long-term functioning of the EU ETS in time before the entry into operation of the MSR,” he added.

It is not clear yet wether the UK will remain inside the ETS after Brexit.

The EU said the main improvements agreed were:

  • Significant changes to the system in order to speed up emissions reductions and strengthen the Market Stability Reserve to speed up the reduction of the current oversupply of allowances on the carbon market;
  • Additional safeguards to provide European industry with extra protection, if needed, against the risk of carbon leakage;
  • Several support mechanisms to help the industry and the power sectors meet the innovation and investment challenges of the transition to a low-carbon economy.

Following the political agreement (a ‘trilogue’ negotiation between the European Parliament, the Council and the Commission), the text will have to be formally approved by the European Parliament and the Council. Once endorsed by both co-legislators, the revised EU ETS Directive will be published in the Official Journal of the Union and enters into force 20 days after publication.

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