The Council Presidency and representatives of the European Parliament and EU Commission have agreed on a rapid reform of the EU emissions trading scheme. The agreement reached by the trilogue widely incorporates the requests made by the German Government. Now, the EU Parliament and member countries must officially approve the outcome of negotiations.
Federal Environment Minister Barbara Hendricks commented: "European emissions trading now has a brighter future. This sends a good and important message for climate action. The reform gives Europe the necessary momentum for the cost effective achievement of our long-term climate targets. This newly reached agreement is an important success for the German Government. The fact that we were persistent, clear and together advocated climate action in Brussels is now paying off. With the market stability reserve we now finally have a mechanism that will gradually limit the availability of surpluses in emissions trading and improve it for the future. This will facilitate the gradual consolidation of the key instrument of European climate policy. However, until the reform comes fully into effect in 2020, we will continue to rely on additional national climate action measures, particularly in the energy supply sector."
Emissions trading currently has a surplus of over two billion allowances, which has severely jeopardised the scheme's appeal and thus the cost effective achievement of the climate targets.
A key outcome of the trilogue negotiations is that at least 900 million tonnes of CO2 allowances will be directly transferred to the reserve (backloading volumes). This roughly equates to Germany's total greenhouse gas emissions for last year. Allowances that have not been used by 2020 will also be put into the reserve to avoid any additional surpluses on the market at the end of the decade.
The new reserve will be set up in 2018 to accommodate backloading volumes. The adjustment of allowances to be auctioned each year in cases of extreme surpluses or shortages will begin in 2019.