Latvia has proposed putting hundreds of millions of unallocated EUAs directly into the MSR in a bid to appease western member states keen to strengthen the supply-curbing measure while keeping the start date at 2021, according to a copy of the proposal seen by Carbon Pulse.
Latvia, current holder of the EU presidency, has suggested withholding the unallocated allowances from sale in 2020 but also invites the European Commission to make a subsequent separate proposal on what should be done with those allowances once in the MSR, according to the document dated Apr. 15.
This would strengthen the MSR bill from the member states’ previous common position, which as a default would sell unallocated EUAs over two years unless a subsequent separate Commission proposal was eventually agreed upon by lawmakers to do otherwise.
In non-binding ‘recitals’ meant to guide future actions, Latvia suggested the subsequent Commission proposal could give options on the fate of the unallocated EUAs in the MSR, including whether to cancel them, let governments auction them, monetise them to raise cash to compensate industries at risk of carbon leakage, or use them to fund “breakthrough industrial innovations”.
In addition, Latvia proposes to only have EUAs due to be auctioned enter the MSR, which could in theory exclude some of the 673 million allowances that eight eastern EU nations can issue to their utilities for free between 2013-2019 in return for modernising their fleet (under Article 10c of the ETS Directive).
“We’re moving closer to a compromise and a package deal is emerging, as we have all the possible elements for it,” a spokesman for Latvia said on Friday, without confirming what was included in the country’s latest proposal.
The Baltic country is chairing governmental talks aiming to agree a common EU Council position to resume trilogue negotiations with the bloc’s Parliament on May 5 and 26.
Last month, the Council entered the trilogue with a common view to start the MSR in 2021 already filled with backloaded EUAs and said the fate of unallocated EUAs could be decided at a later stage.
But this week French and German officials spoke up in favour of an earlier start, countering claims by their Polish counterpart that the EU Council had settled on a 2021 date and teeing up another battle to agree common ground.
Poland’s top climate official Marcin Korolec this week said a potential compromise could be found by earmarking some unallocated allowances for a special fund to guard against carbon leakage.
National officials will discuss the issue at a Council environment working party on April 21 before attempting to agree a trilogue mandate at a Coreper meeting on April 29.
The finished MSR text still needs to be signed off by member states and the full EU Parliament, which has set an indicative voting date of July 6, according to the assembly’s procedure file.
By Mike Szabo and Ben Garside – ben@carbon-pulse.com
