Fortum: Backloading inadequate to revitalise EU emissions trading

PRESS RELEASE 8 November 2013

A directive amendment related to the backloading of emission allowances to be
auctioned is on the agenda of the EU member state's Permanent Representatives
Committee (Coreper) today, 8 November. However, backloading alone is not enough
to restore the steering effect of emissions trading; additional measures are
needed. The focus now should be on setting the climate target for 2030.

“We are pleased that the issue is finally advancing because backloading is a
politically important milestone in revitalising emissions trading. However, we
hope that the Commission will quickly launch other structural reforms for the
scheme as well. Emissions trading is the cheapest and most effective way to
reach the CO2 emission reduction targets,” says Fortum’s CFO Markus Rauramo.

In addition to backloading, other measures are needed:

1) The climate target for 2030 has to be agreed as soon as possible. Climate
policy should be based on a model with only one steering target, namely an
ambitious and binding carbon dioxide emission reduction target. Overlapping
targets for renewable energy and energy efficiency should not be set in the
future. It is necessary to agree on the CO2-target in the European Council in
March 2014.

2) Emissions trading should be renewed by tightening the ETS cap and managing
oversupply. The CO2 reduction target for companies acting within emissions
trading, the so-called ETS cap, should be tightened as soon as possible
according to the 2030 climate target. In addition, the supply of allowances
should be flexible based on demand. An allowance supply adjustment mechanism ,
when planned well, would prevent the emergence of the current kind of
oversupply in the market and the plunge in emission allowance prices.

While backloading alone is not enough to revitalise emissions trading, it does
restore confidence in it and thus makes it an important measure politically.
Backloading is a necessary but inadequate step as it has no substantial effect
on the current problem, i.e the surplus of allowances on the market.

Fortum Corporation
Corporate Communications

Additional information:
Esa Hyvärinen, Vice president, Corporate Relations, Fortum, tel. +358 40 82
62646
Kari Kankaanpää, Sustainability Manager, Climate and Environmental Affairs,
Fortum, tel. +358 50 453 2330

Background information:

Backloading means temporarily withdrawing 900 million emission allowances from
the market in 2013−2015 and postponing the auctioning of them to 2019-2020. The
goal is the reduce the allowance oversupply which has led to the plummeting of
the price of emissions allowances.

The European Parliament voted for the directive amendment last summer, and
today the issue advances to the agenda of one of EU’s most important
preparatory bodies, the Permanent Representatives Committee (Coreper). The
Committee is made up of permanent representatives, i.e. EU Ambassadors, of the
member states. If the committee reaches a consensus today, so called trilogue
negotiations can be started between the EU Council, European Parliament and
Commission. If a consensus is reached in the negotiations, the Parliament will
vote on the directive amendment and the EU's Environment Council approves the
amendment in December.

In addition to the directive amendment, the implementation of backloading
requires changes in the Auctioning Regulation which is decided upon by the EU’s
Climate Change Committee.

Fortum

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