In the Committee of Permanent Representatives (COREPER), the ambassadors of the EU member states adopted a negotiation mandate yesterday for the emissions trading scheme reform. This will facilitate a swift conclusion of the trilogue negotiations between the Latvian Presidency, the European Parliament and the Commission. Federal Environment Minister Barbara Hendricks described the decision as an important step towards a thorough reform of the emissions trading scheme.
Minister Hendricks commented: "I am very pleased with the ambitious climate policy mandate for the second trilogue adopted by the Council. The Council advocates the market stability reserve starting operation in early 2019. This is a huge concession to the European Parliament and also takes a German core requirement into account." The Commission had proposed that the reserve be introduced as late as 2021.
Hendricks also welcomed that 900 million emission allowances, which had been taken off the market through backloading, and other residual allowances from the current trading period will be taken off the market permanently and transferred directly into the new market stability reserve. "I am confident that the upcoming negotiations between Council, Parliament and Commission will soon be concluded. Europe has an opportunity to show that its key instrument for climate action will regain its edge. That is imperative because it is the only way for us to achieve European and national climate targets."
The current surplus of more than two billion emission allowances massively undermined the incentives the scheme was supposed to provide, thus endangering the cost-effective achievement of national and European climate targets. The holding back of allowances (backloading) was merely a first step to gain time for a structural reform. As part of the 2030 EU climate and energy package, the European heads of state and government adopted the basic structure for the reform: a market stability reserve will be introduced which, based on a set of rules, will help to control the annual allowances budget. When large surpluses occur, the amount of available allowances will be reduced and the allowances will be transferred into the reserve. Should there be a major shortage, additional allowances can be auctioned from the reserve.
According to the COREPER decision, the European Council's key points in upcoming negotiations will be:
- Establishing the market stability reserve in 2018 in order to transfer allowances from backloading into the reserve
- Controlling quantities as of 1 January 2019
- Transferring residual amounts from the current trading period into the reserve, later review and proposal for use through Commission
- Limited relief for poorer member states whose additional amounts for auctioning from reallocation (10 percent) will not be taken into account for contributions to the market stability reserve (timeframe still under negotiation)