France-based think-tank The Shift Project is urging the EU to set a steadily increasing ETS auction reserve price under the MSR starting at €20 to help prevent higher price spikes in future.
In a position paper published this week, the researchers said this “price also” reform measure would not contradict with the “quantity only” approach to the ETS outlined by the European Commission to date.
“This paper shows that all 2C scenarios converge towards a robust and steadily increasing price on carbon, reaching $140 in 2040,” they said.
“The ETS will not reach that price level on its own, especially since the EU has been increasing fossil fuel subsidies. We therefore recommend reinforcing country – and sector-specific measures together with the ETS, in order to generate implicit and explicit carbon prices at a level compatible with EU climate ambitions.”
The Shift Project has favoured setting an ETS auction reserve price since 2014. The French government earlier this year proposed a similar measure via the MSR as a means of setting a carbon price corridor.
The idea may struggle to find sufficient backing after Germany’s environment ministry said it favours supply-side measures but that it was open to considering additional ETS reforms.
However, there are signs of support for price-boosting measures within Germany.
This week, influential German energy think-tank Agora Energiewende published a proposal outlining how Europe’s power market could be 50% renewables-based by 2030.
In its “Power Market Pentagon” paper, the organisation said the EU ETS should be further modified and it proposed a minimum price of €30, the automatic cancellation of surplus allowances, and a close interaction between the market and climate policies at member state level.
By Ben Garside – firstname.lastname@example.org