A more ambitious reform needed to salvage the EU ETS

The European Emissions Trading System (ETS) needs a more ambitious reform than

proposed by the Commission in 2015. As numerous EU wide and national policies

affect the ETS, there is no silver bullet to address all the shortcomings of

the existing system. Only a combination of stronger short-term and long-term

measures can provide the reform much needed to rebuild confidence in the

system.



These are the key messages of the study contracted to the French consulting

company FTI-Compass Lexecon Energy by a group of large European power companies

EDF, ENEL, EDP, ENGIE, Fortum, Iberdrola and CEZ. The study report was

introduced in Brussels today.



“Most of future investments are currently on hold across Europe because a clear

and robust long-term carbon price signal is missing. The confidence on a truly

European, market-based instrument, the ETS, is at risk and the window of

opportunity to fix it is closing soon. We need a clear signal to secure the

competitiveness of existing low carbon capacities and future investments,”

Pekka Lundmark, President and CEO of Fortum, highlighted in the launch event.



The study has analysed in-depth several options to reform the ETS regarding

their impacts on the supply-demand and prices on the carbon market as well as

on future emissions trajectory. The analysis shows that with the proposed ETS

reform Europe would miss its long term emissions target. However, the analysis

also shows that several combinations of options are available to rebalance the

carbon market and align the ETS with the long term EU targets.



In Fortum’s view, the redesign of the market stability reserve (MSR) combined

with an increased linear reduction factor (LRF) could be one of the most

efficient combinations to improve the functioning of the system. At the same

time, it is necessary to improve the coherence of the overlapping policies and

adjust the ETS accordingly. “We do have many options to fix the ETS. Now we

simply need political will and legislative agility to reform the ETS to its

original ambition,” Lundmark concludes.





Fortum Corporation

Group Communications



Further information:

Esa Hyvärinen, Senior Vice President, Public Affairs, +358 40 826 2646

Anne-Malorie Gerón, Vice President, EU Affairs, +32 478 65 28 01



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