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Press release

A more ambitious reform needed to salvage the EU ETS

08 November 2016, 15:22 EET


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

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

Read more:
Pekka Lundmark's speech at the report launch event on 8 November 2016

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

Fortum's vision is to be the forerunner in clean energy. We provide our
customers with electricity, heat and cooling as well as other energy solutions
that improve present and future life. Already 64% of our electricity generation
is CO2 free. Our main markets are the Nordic and the Baltic countries, Russia,
Poland and India. In 2015, we employed some 8,000 energy sector professionals,
and our sales were EUR 3.5 billion. Fortum's share is listed on Nasdaq