EU leaders call for 'well-functioning' carbon market

: Emissions
26/10/16

EU leaders called for the bloc's ongoing revision of the emissions trading system (ETS) to "urgently" ensure a "well-functioning, transparent and predictable carbon market", while also seeking a fresh assessment of ETS2.

Leaders meeting in Brussels on 15-16 October said the revised ETS should protect against carbon leakage, reduce carbon price volatility and mitigate its impact on electricity prices. They gave direction to the European Commission, but final legal texts revising the ETS will require formal adoption by the European Parliament and EU environment and climate ministers.

Leaders also stressed that the ETS must continue to provide a "market-based price signal for carbon emissions" that drives investment and innovation, preserving its "essential" role in the EU's climate and energy transition.

There was no shift in leaders' language on reducing the EU's dependence on "volatile fossil fuel markets". They said the energy transition is the most effective strategy for structurally lowering energy prices and delivering "clean, abundant and homegrown" energy.

But some member states remain concerned about the impact of carbon pricing on energy costs. Czech prime minister Andrej Babis called for an immediate "solution" to the ETS and its effect on energy markets.

"It is extremely unfair that some states, because they have both a geographical and an energy advantage, pay €30-40/MWh for electricity, while we pay €160/MWh," Babis said, pushing back against the EU taking more ETS allowance revenues.

Austrian chancellor Christian Stocker proposed greater transparency over how much of gas and electricity prices is attributable to CO2 costs.

"That should then also reduce the price of renewable energy," he said.

Separately, leaders called on the European Commission to update its assessment of "all impacts" of ETS2, the extension of carbon trading to emissions from fuels used in buildings and road transport. They said the review should examine in particular ETS2's "design and safeguards".

Belgian prime minister Bart De Wever said assessing "all impacts" of ETS2 does not mean suspending the system.

"It's coming," he said, noting the political sensitivity of ETS2 because of its effect on household purchasing power.

Finnish prime minister Petteri Orpo noted there were no further changes to the one-year delay to ETS2, which is now due to start on 1 January 2028 rather than 2027.

By Dafydd ab Iago

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