MEP compromise on EU ETS reform still feasible: Update

Adds comments from other MEPs

The European Parliament's environment committee could reach a compromise on reform of the EU emissions trading scheme (ETS) before an 8 December vote, the rapporteur for the process, MEP Ian Duncan, has said.

Duncan is responsible for steering the legislation, which will determine the rules for phase 4 (2021-20) of the cap-and-trade programme, through parliament.

Lead MEPs representing their respective political parties failed to reach a deal on Duncan's draft proposal at a meeting yesterday evening, after which he said the December vote was "in jeopardy".

But Duncan said today that he is still working towards a vote on 8 December and that he is optimistic that consensus can be reached. No more shadow rapporteur meetings are scheduled — it now falls to him to "knock heads together" to make groups see "where compromises could lie".

"The sad thing is that everything is still on the table and no-one is in any doubt over what the different components mean in terms of ambition," Duncan said. "It is a question of finding that common, sweet ground on which we can all comfortably stand."

A cogent package has to be sent to plenary if the delicate balancing act necessary to forge an agreement is to be achieved, he said.

The environment committee has to deliver a proposal that will secure a strong mandate, so that parliament can be empowered to negotiate serious change in trilogue talks with the EU Council of member states and the European Commission, Duncan said.

The European People's Party (EPP) has expressed disappointment that the Socialists and Democrats (S&D) rejected Duncan's proposal. It is unlikely that a majority of MEP votes in favour of the proposal will be achieved, without S&D support.

The EPP has the largest number of MEPs in the committee, 20, with the S&D in a close second with 18 members. The Alliance of Liberals and Democrats and the European Conservatives and Reformists each have seven, while the Greens number just five.

The S&D insists on a higher 2.4pc linear reduction factor, as opposed to the 2.2pc tabled by Duncan, which is in line with the commission's original proposal, one of the shadow rapporteurs said.

But Duncan's proposal is more ambitious, as it suggests that 750mn permits placed in the market stability reserve should be cancelled at the start of 2019. A 2.4pc/yr cut in allowances will eliminate only around 300mn permits in phase 4.

And he recommends that the stability reserve's intake rate of surplus allowances be doubled to 24pc/yr for the first three years after the mechanism enters into force.

Duncan's draft paper is closely modelled on a proposal adopted by parliament's energy and industry committee last month, which the EPP strongly backs on the basis that it strikes a balance between climate ambition and protecting industry against carbon leakage.

His paper proposes a binary approach to free allowance allocation, as well as a 5pc rise in free permits and a corresponding cut in auctioned allowances to prevent the cross-sectoral correction factor from being implemented.

Any postponement of the 8 December vote would severely undermine parliament's negotiating stance, the shadow rapporteur said.

The environment committee will be occupied with the winter package of policy proposals for renewables, energy efficiency and power market reform in January.

This means that a committee vote on EU ETS reform would be pushed back by a month, and that a plenary ballet would take place in April at the earliest.

But parliament must finalise its position before the council's summit at the end of the first quarter, to ensure that it is in a strong position to push its two key priorities — higher climate ambition and better protection for EU industry.

EU member states resist the aims, as any increase in free allowances to support industrial participants would lower governments' auction revenues. And eastern European countries oppose stronger climate action.

The UK triggering Article 50 and starting discussions over its departure from the EU could further weaken parliament's position, as London has historically supported ambitious greenhouse gas abatement.

The S&D is demanding too much, although there still is room for manoeuvre, Duncan said. Any adjustments cannot afford to deviate too much from the proposal, he added.