Yesterday in the Committee of Permanent Representatives (COREPER), representatives of the EU member states adopted a negotiation mandate for the emissions trading scheme reform. This clears the way for trilogue negotiations between the Latvian Presidency, the European Parliament and the Commission to get underway soon. Federal Environment Minister Hendricks was pleased about parts of the compromise, but warned that steps towards the reform need to be taken more quickly.
Minister Hendricks pointed out: "The good thing is, the trilogue can start again soon. I also believe it is important that the 900 million tonnes of CO2, which up to now were held back from the market under backloading, are not put on the market again but instead are transferred directly to the market stability reserve. However, we are still not satisfied with the result. In Brussels, we will continue to work hard to ensure that this reform is adopted as soon as possible. We cannot afford to waste any time when it comes to climate action. I hope that the upcoming negotiations between the EU member states, the European Parliament and the Commission will bring about further improvements. Europe has to show that its key climate instrument will return with full force very soon. This is vital if we want achieve our European and national climate targets."
The current surpluses of over two billion EU emissions trading allowances negatively impact on the scheme's incentive effect, thus endangering the cost-effective achievement of national and European climate targets. The holding back of allowances (backloading) was merely a first step to allow for more time to implement a structural reform. On 23 and 24 October 2014, the European heads of state and government adopted such a reform in principle as one of the key points of the 2030 EU climate and energy package: a market stability reserve (MSR) will be introduced that, based on a set of rules, will control the annual allowances budget. In the case of large surpluses, allowances will be reduced and put into the reserve. Should there be a major shortage, surplus 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 MSR in 2018 to accept backloading volumes, management of allowances from 1 January 2021
- Transferring allowances held back (under backloading) into the MSR
- Management of surplus allowances in phase 3: request for review by Commission
- Shortening response time to a year once surpluses are identified
The European Parliament adopted more ambitious positions on key points for the trilogue negotiations. These include launching the MSR at the end of 2018, transferring allowances held back under backloading and surplus allowances from phase 3 into the MSR and establishing an innovation fund.