“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.
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
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.
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