The European Union reached an agreement on post-2020 carbon market reforms last week, with the aim of curbing the number of allowances in the market and so supporting the carbon price. Some analysts say these measures could result in a carbon price as high as €35/tCO2 by 2023. (more…)
The European Parliament has voted to support reforms to the EU ETS (Emissions Trading System) that will curb the supply of EU Allowances (EUAs) post-2020, as a means of supporting the price of carbon and encouraging carbon abatement. The draft reform will now enter tripartite negotiations between the Commission, Parliament, and the Council.
The EU ETS is a cap and trade scheme that places a cap on emissions from 11,000 factories and power plants across the EU. Participants must submit EUAs equal to their emissions each year, the majority of which must be purchased at auction. However, the design of the EU ETS has resulted in an excess of EUAs in the market, particularly during periods of reduced economic output, and this has led the price to fall. In 2008, EUAs traded between €15 and €29/tCO2, but fell below €10/tCO2 from 2012 and are currently trading around €5.00/tCO2. In the UK, a tax known as the Carbon Price Floor is in place to act as a “top-up” to the price of allowances, but a firmer EUA price is required to encourage carbon abatement across the EU. For example, a higher carbon price would significantly increase the cost of generating from coal and, therefore, encourage the take-up of less carbon-intensive forms of generation. (more…)
The Preliminary data released by the European Commission shows that installations and aviation regulated under the EU Emissions Trading System (EU ETS) reported a 0.5% reduction in emissions in 2015, at a total of 1.670 billion tonnes CO2 equivalent (CO2e).
The EU ETS covers emissions of carbon dioxide, nitrous oxide, and perfluorocarbons. Sectors included under the scheme are power and heat generation and energy-intensive industries such as oil refineries, steel works, and production of iron, aluminium, metals, cement, lime, glass, ceramics, pulp, paper, cardboard, acids, and bulk organic chemicals. Aviation was also brought under the scheme in 2012, which means that all flights from, to, and within the European Economic Area (EEA) are included in the EU ETS.