EU agrees stronger carbon price control


EU agrees stronger carbon price control


The EU Parliament, Council and European Commission have reached an informal agreement on a more responsive price control mechanism under the EU Emissions Trading System (EU ETS), according to a key European Parliament member.

The agreement came during a third round of three-way talks to reform the EU ETS under the bloc's Fit-for-55 climate package.

"We agreed on a strong mechanism against price hikes. The Article 29a was sharpened," Peter Liese, the lead negotiator for ETS reform, said in a statement.

The revised Article 29a is a mechanism under the EU ETS Directive that allows for intervention to increase supply if the carbon price traded at more than 2.4 times the average of the previous two years for six consecutive months or more.

Although carbon prices have skyrocketed in recent years, they have never reached such a level and the mechanism has never been triggered. Even if the threshold was met, it would leave any intervention at the discretion of the European Commission and national governments, under the current regulation.

That's now changed under the latest agreement, which has lowered the threshold for intervention and made it automatic rather than discretionary.

"The threshold for when it is activated goes down from 3 to 2.4 and 75 million allowances will be released in the ETS market automatically if the threshold is reached," said Liese, who is also the environment spokesman for the center-right European Peoples Party, the largest political group in the EU Parliament.

This way, consumers and industry are much better protected and can prepare much better for the transition, he said.

The price control decision was now set, but the new rules would only take effect if the rest of the reforms, including the overall emissions cap for the ETS covering industry and power generation, and the timing for phasing out free EUAs to industry covered by the planned carbon border adjustment mechanism, were agreed, said Liese.

The EU's decision-making bodies also agreed much stricter wording on international climate finance, Liese said.

Some member states are already using the revenues from the EU ETS to contribute to their obligation to provide climate finance at the international level, but others are falling very short, he said.

Under regulations, EU member states need to report on the climate obligations, such as their commitment to continue scaling up their international climate finance toward the developed countries' goal of mobilizing at least $100 billion a year as soon as possible, and that they substantially increase their efforts further, he said.

The EU institutions also agreed on including carbon capture and use and negative emissions through direct air capture, which means these technologies can be used to meet the EU's climate policy goals, Liese said.

"They may even be included in the ETS but as this issue is very complex, the commission needs to assess all the options," he said.

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