The Nordic energy industry calls for support for a compromise solution on backloading

Leading Nordic Energy Companies and national energy associations letter to Environment Committee of teh European Parliament.

​Dear member of the Environment Committee of the European Parliament,

We, the leading Nordic Energy Companies and national energy associations representing more than 75% of the power generation, distribution and the retail market in Scandinavia, write to you on the urgent matter to support the EU ETS and ask you to vote in favour of the Groote report on the proposed backloading of 900 million emission allowances. 2012/0202(COD).

The Nordic power system has been a model for European energy policy with our long and strong Nordic corporation on energy; the broad political support has liberalized well-functioning markets and not least the many strong physical interconnectors making the Nordpool power market the market model. The EU ETS therefore also has a strong Nordic support as the pan-European market-based instrument making the polluters pay and thereby encourage innovation and investment in clean technology and in decarbonizing the power system.

The EU ETS is the main policy to achieve the European Union’s goal of an 80-95% cut in greenhouse gas emissions by 2050 compared to 1990 in the most cost-effective way. In order to progress the file, and recognising the careful attention given by MEPs to new amendments, we encourage and actively support a compromise proposal as a first step to strengthen the carbon market. If a short-term intervention as backloading, preferably in combination with a permanent set-aside, leads to substantially increased electricity prices, we support compensation given to electricity intensive industry to avoid carbon leakage in accordance with the EU ETS-directive and state aid guidelines.

The current price of approximately 4 euro/t is not stimulating sufficient low-carbon investments or innovation. Furthermore, without agreement on the backloading proposal the ETS will lose credibility and soon the price is expected to plummet even further, thus threatening long-term survival of the ETS. The consequence of a failing EU ETS will be a patchwork of 27 (28) fragmented national energy and climate policies ranging from regulation to taxation, that would distort the internal energy market, one of EU’s greatest accomplishments. This will fragment the market, resulting in higher societal costs and cost for all electricity customers – residential, industrial, big business and small business.

The ETS carbon market is the only known market where there is no supply reaction to falling demand: the back-load can help to amend this problem. The argument is made that intervention is against the principle of the market – but there already have been and will be legislative interventions in the ETS, including the front-load in 2009 when demand was expected to be high.

Globally, carbon markets are emerging covering 20% of global emissions with over 40 national and 20 sub-national schemes like in China, the USA, Australia, and South Korea, in order to foster investments in low-carbon technology. Globally, eyes are on Europe as the EU ETS used to be the front runner of carbon markets but now EU climate policy has lost its role model status and risks being outrun by others unless political action is taken. This gives the EU an opportunity to stimulate development and investments in low-carbon technology and industry, while at the same time to regain global climate change leadership. However, policy makers must act now to support the EU ETS.

We remain fully at your disposal in case you have questions or wish to discuss the issues further.


Yours sincerely,
Danish Energy Association
DONG Energy
Energy Norway