“Saving” the third EU ETS
supposed to start after
German elections
A
fter the German elections on 22
September 2013, 900 million
emission allowances will be taken out of the third EU Emissions
Trading Scheme (EU ETS) (hereafter
called the “third EU ETS”, referring to the
third running period of the EU ETS (2013
to 2020)) in the period 2013-2015. The
allowances taken out will be put back in
the third EU ETS at a later time (2019 and
2020). This is whole process is referred to
as “back loading” of emission allowances.
The aim of the back loading is to ensure that the carbon market as of the third
EU ETS can function properly. Currently,
there are too many EU ETS emission allowances available on the market, which
hamper the orderly functioning of the EU
ETS as well as the market price of emission allowances in the third ETS. Therefore, the Commission wants to ensure that
the market price of emission allowances is
at a reasonable level in order to prevent
companies who fall under the EU ETS
(e.g. aluminium producers, glass producers, ceramic manufacturers) from no longer investing in new technologies in order
to reduce their greenhouse gas emissions.
If the price of emission allowances is too
low, companies are more likely to buy
emission allowances instead, because
auctioning allowances is often cheaper
than investing in technologies that reduce
greenhouse gas emissions.
During the third EU ETS period, the
European Commission proposes to decrease the number of emission allowances
available for auctioning on the market per
year to prevent emission allowance prices
from dropping. The following are the reduction amounts that are proposed to be
taken out from the third EU ETS:
? 400 million emission allowances in
2013;
? 300 million emission allowances in
2014; and
? 200 million emission allowances in
2015.
16 | Enhesa Flash September 2013
In the years 2019 and 2020, the volume of available emission allowances will
be increased. The following amounts will
be made available in the third EU ETS
later:
? 300 million emission allowances in
2019; and
? 600 million emission allowances in
2020.
The European Commission proposed
no indicators for the years 2016, 2017 and
2018, which most likely indicates that the
available amount of emission allowances
will not be modified during these years.
The proposal does not affect the overall
volume of allowances to be auctioned in
the third EU ETS. Only the distribution of
auction volumes over the eight-year period
is affected.
Finally, it should be noted that in July
2013, the European Parliament approved
the aforementioned Commission proposals on back loading on the condition
that sectors subject to a risk of carbon
leakage are not harmed by the back loading. Carbon leakage means an increase in
greenhouse gas emissions in third countries where industry would not be subject
to comparable carbon constraints. Examples of these sectors are aluminium producers, pulp manufacturers, and office
machinery manufacturers. The European
Parliament hopes that by this measure the
“carbon leakage” industry remains in Europe, but still that the EU ETS can function
again properly. If the back loading works,
it will be implemented later in fall 2013.
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- Marlies Huijbers, EU EHS Regulatory
Consultant