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EU ETS reserve talks to conclude mid-year: Update

04 Mar 2015 18:34 GMT
EU ETS reserve talks to conclude mid-year: Update

Updates story throughout

Amsterdam, 4 March (Argus) — EU decision-makers will conclude negotiations on the market stability reserve (MSR) by the middle of this year, the head of the EU emissions trading scheme implementation unit, Peter Zapfel, said.

The EU Latvian presidency is working to prepare EU member states for talks on the MSR proposal with the European Parliament, and the EU Council will be ready soon, Zapfel said.

"I am confident that this legislative procedure will have concluded by the end of the Latvian presidency," Zapfel said at the Argus European Emissions Markets conference in Amsterdam, the Netherlands. "There is nothing that makes me think this will not be the case. This is not being an optimist for the sake of optimism. No member state has said there should not be an MSR — the discussion is all about how it should be designed."

Council meetings, scheduled for 10 and 16 March, and a meeting of member states' permanent representatives on 25 March, offer an opportunity for countries to reach agreement on the MSR's design elements, including its start date. The first trilogue discussions may be scheduled as early as 30 March.

A strong contingent of member states, led by Germany, favour a 2017 start, whereas other countries such as Poland support the European Commission's originally proposed 2021 launch. Parliament's environment committee last week adopted a proposal for the MSR to become operational by the end of 2018 at the latest, and voted for parliament to enter talks with the council immediately, in an attempt to speed up the legislative passage of the proposal.

Under new rules on voting procedures in the EU Council, there is no qualified majority nor a blocking minority for an early start to the MSR, the International Emissions Trading Association's (Ieta) EU policy director, Sarah Deblock, said. But under the old procedural rules, which can be used until 2017 if a member state requests, Poland together with other countries form a blocking minority, Deblock said.

"EU member states are trying to find as broad a compromise as possible. Discussions are progressing at a rate which suggests this is conceivable before the end of the month," she said.

Swiss building materials company Holcim's risk management chief, Carsten Schirmeisen, described it as "mandatory" for the MSR to have an early start date and cautioned against another long, drawn-out debate on EU ETS reform.

"The EU ETS has brought CO2 very much into boardroom discussions, but it has since lost all credibility due to the price crash and inability of EU decision-makers to come up with a quick fix," Schirmeisen said.

"The implementation of the back-loading proposal took way too long — it will be really detrimental if the MSR took another few years," he said. "But I do not think it will and I hope not."

Once the MSR has been agreed, the commission will proceed swiftly with revising the EU ETS directive and developing a design proposal for phase 4 of the EU ETS (2021-28), Zapfel said.

The EU ETS will remain the EU's flagship climate policy instrument used to build wider consensus, he said. But under the energy and climate package for 2030, agreed by the EU Council in October, the scheme will incorporate a modernisation fund capitalised with 2pc of EU ETS allowances, with the auction revenues to be used for the renewal of lower-income member states' energy systems.

This will make those that are more sceptical of tougher EU climate policy "more interested", because it will specifically benefit 10 low-income eastern European countries, Zapfel said. These countries are defined as those with a GDP per capita of less than 60pc of the EU average. The 10 countries will also be given the power to manage the fund, while the European Investment Bank will be involved in the project selection, he said.

An additional fund populated with 400mn allowances — known as the New Entrants' Reserve (NER) 400 — will also support low-carbon technology innovation in the industrial sector. This will build on the existing NER fund that was meant to provide support for carbon capture storage and renewable demonstration projects.


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