EU carbon prices must return to levels near €30 in order to fix the bloc’s ETS, according to UK MEP Ian Duncan, though he admitted lawmakers were unlikely to alter the main price-boosting reforms currently on the table.
“I will do all I can to make sure the CO2 price climbs,” Duncan told the Argus Emissions Conference in Amsterdam. “To me, the most important thing will be getting a carbon price that makes the difference.”
Duncan is steering the post-2020 ETS reform bill through the EU Parliament’s cross-party environment committee in a lawmaking process expected to finish in Q1 2017 at the earliest.
He said that the aim of lawmakers must be to ensure the reforms can push EUA prices back towards the €30 level they briefly reached in 2008, and then on to €40 and €50.
“What it can’t do is scud down to zero, as happened after the 2008 recession, because if it does that then the confidence in the system will be lost… The EU ETS is broken, if it isn’t driving forward a carbon price, that’s the problem,” he said.
LIMITED OPTIONS
While Duncan said he was giving top priority to boosting EUA prices, he acknowledged that lawmakers would be unlikely to deepen the annual cap reduction more than the proposed 2.2%.
Adjusting the so-called linear reduction factor (LRF) of the cap is the main price-sensitive element of the bill, which otherwise mainly concerns how to divide up allowances.
“If Mr. Canete is not willing to incorporate or drive forward the Paris Agreements, then the LRF will remain exactly where it is now … We will not be able to open it up because we will not be able to have the mechanics underneath it to make that difference,” he said.
“There will be ambition to do so, but I don’t believe we will realise that ambition. That might sound cynical, but it is realistic.”
Europe’s climate commissioner Miguel Arias Canete and the Commission have indicated that any review of EU’s 2030 climate goals, to which the LRF is calibrated, should come after a global stocktake in 2018.
Duncan admitted that the move to deepen the LRF does not depend entirely on the European Commission, the EU’s executive, but said it would be harder for lawmakers to instigate changes without a Commission proposal.
“We rely on the Commission and its services for much of the mechanics for the laws that we make,” he said.
“On Paris and the LRF, the Commission I think will prevail, because a number of the larger political groups [in the Parliament] will probably adopt the same view.”
He added that even if the Parliament pushed for more ambition to the LRF then it would be likely pushed back by the Council of EU member states, the bloc’s co-legislator.
By Ben Garside – ben@carbon-pulse.com
