There is new-found optimism in the EU ETS, two years on from the market’s nadir when the European Parliament initially rejected backloading, researchers from Norway’s Fridtjof Nansen Institute said on Friday.
In a blog published on a London School of Economics website, Jørgen Wettestad and Torbjørg Jevnaker said some momentum was finally building behind the beleaguered carbon market due to five key developments:
- Member states less divided. Since elections, Germany moved from ambivalent bystander to leading role. Eastern states still wary but Poland more constructive.
- The European Commission now less internally split and backing the de-politicised MSR.
- A less divided European Parliament with better dynamics between the ‘grand coalition’ of EPP and Social Democrats.
- Industry less divided, with energy-intensive industries having reluctantly accepted the MSR and been appeased with promises in the 2030 framework on carbon leakage.
- Greater help from ‘outside’, with the upcoming December UN climate deal in Paris adding greater urgency to getting the MSR adopted in June.
“The EU’s ability to discuss and, importantly, agree on common positions has improved. This is due to a combination of multi-level factors, including elections and a change of tactics that created new dynamics. Moreover, having had more time to work on a new and more sophisticated proposal, the Commission has helped set the new terms of the debate, which is now more constructive. While an MSR alone may not be enough to fix the ETS, it will be an important element, with additional reform steps now on the way,” the researchers said.
Their research is part of an upcoming book and the research project ETS Diffusion, which is funded by the Norwegian Research Council.