(Updates with details regarding solidarity fund ringfencing)
EU nations have agreed to back an early-2019 start date for the MSR after the Czech Republic defected from a blocking minority of mainly eastern member states during talking in Brussels on Wednesday.
A group led by Poland had pushed for the MSR to start in 2021, but the Czechs’ decision to side with western governments broke the blocking minority.
The decision, which aligns the position of the EU Council of member states with that of the EU Parliament on the start date, also calls for backloaded and unallocated allowances to go directly into the reserve, one EU source said.
It was, however, unclear as to how many, if any, allowances had been earmarked for an innovation fund for industrial manufacturers. A draft negotiating text seen by Carbon Pulse before the meeting called for 75 million units to be put in the fund, but one source said that may not have survived the negotiations.
EUA prices rose on the news, with the front-year futures climbing to a two-month high of €7.53 before sliding back to settle the day at €7.50.
Both Council and Parliament must agree for the measure to become law and they are due to hold talks to finalise the bill on May 5. The Parliament is likely to push for the earmarking of some of the withheld EUAs to fund innovation, as its environment committee supported selling as many as 300 million.
BREAKING SOLIDARITY FOR SOLIDARITY?
A spokeswoman for the Czech environment ministry confirmed to Carbon Pulse that the country changed its official stance on the MSR’s start.
She added that EU member states had also agreed that a “solidarity fund”of EUAs earmarked for poorer countries, created under the bloc’s 2030 climate package last autumn, should remain unaffected by the MSR.
The EU in October agreed that between 2021 and 2030 some 10% of all allowances to be auctioned will be ringfenced for less wealthy EU member states “for the purposes of solidarity, growth and (electricity) interconnections”.
The news of the MSR mandate reached at today’s Coreper meeting was initially announced by France’s EU envoy Alexis Duterte via Twitter.
— Alexis Dutertre (@AlexisDutertre) April 29, 2015