French Environment Minister and COP-21 President Segolene Royal has tasked three high-level energy and climate experts to develop proposals on how to implement a price floor for EU carbon allowances as well as for European electricity generation.
The French environment ministry on Saturday said Royal had appointed to the team CEO of energy giant Engie Gerard Mestrallet, former minister of development and current director of WWF France Pascal Canfin, and economist Alain Grandjean.
In an open letter dated Mar. 25, Royal asked the trio to develop “concrete proposals on the establishment of a carbon price that would steer investment towards the most favourable climate projects,” breaking the work into three areas:
- Examining how “a more robust price trajectory” could be implemented in the EU carbon market. This, Royal wrote, should be done through studying other cap-and-trade schemes that have price floors and ceilings, and understanding how to translate those lessons into a bloc-wide agreement for similar actions under the current post-2020 reform process.
- Identifying how a carbon price can be integrated into non-ETS sectors such as transportation and buildings.
- Investigating how a floor price could be introduced for the production of electricity across Europe, either through regional co-operations or initially based at a national level but spread via subsequent “ripple effects”.
Royal said the panel is expected to submit an initial roadmap by Apr. 15, which should include plans to raise the matter at the World Bank’s annual meeting in Washington later this month.
The minister added that she will in June convene a pro-carbon price coalition formed at last December’s climate summit and made up of 74 countries and 1,000 companies. A draft report should be submitted by the taskforce by that meeting, followed by a final report in early July.
France is circulating among fellow EU member states a proposal to modify the ETS’s Market Stability Reserve to introduce a ‘soft collar’ for allowance prices, because it says the bloc’s carbon price remains too low and existing reforms don’t do enough to raise it.
The plan would see both a reserve price and a ceiling price some 3-6 times that level introduced in the government EUA auctions, forming a corridor that rises annually along a predetermined trajectory to provide more certainty for market participants, investors, and governments.
The non-paper is based on recommendations made to French President Francois Hollande last year by a commission chaired by Canfin and Grandjean, but experts say the proposal has so far received a mainly cool reception from governments and stakeholders.
By Mike Szabo – mike@carbon-pulse.com
