Carbon price ‘too low’ to stimulate green investment

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Last year, Europe saw an increase in the use of coal for the first time in the recent years and much of this is down to the failing European Emissions Trading Scheme, writes MEP

This week, members of the European Parliament rejected the European Commission proposal to withhold greenhouse gas emissions allowances from the European Union’s carbon market by a narrow majority – 334 to 315 in the vote. By doing so they have dealt a huge blow to the future of the European Emissions Trading System. They have also betrayed the continent’s long-term economic and environmental interests.

The ETS is the largest carbon trading scheme in the world and is designed to drive down emissions from the power sector and heavy industry on an annual basis to achieve Europe’s 20 per cent GHG reduction target by 2020. Setting a carbon price was also meant to promote low carbon investments and drive innovation into green technology.

Yet, the current EU carbon price is almost 10 times lower than was expected when the ETS was agreed in 2008 – due to the large oversupply of emission allowances in the wake of the economic crisis. The current carbon price of less than €3 per tonne of carbon dioxide – against the €30 originally envisaged – is too low to stimulate investments in low carbon technology. Instead, last year Europe saw an increase in the use of coal for the first time in the recent years.

Everyone agrees that the ETS needs long-term structural reform. Designing such a reform programme will take time, which the ailing ETS does not have. This is why the commission proposed to ‘backload’ a number of allowances – sell them later than planned – to stimulate the price of carbon and keep the market functioning until long-term adjustments to the ETS can be made. The allowances would be returned to the market at a later stage and there is robust analysis to suggest that this will not have any negative impact on industry.

via Carbon price ‘too low’ to stimulate green investment – Public Service Europe.

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