France urges EU to strengthen means against carbon price volatility


France urges EU to strengthen means against carbon price volatility


After the European Parliament voted down the key parts of carbon market reform, France, the holder of the EU rotating presidency, plans to ask the bloc to enhance a mechanism to prevent excessive carbon price spikes as part of the most comprehensive reform of its emissions trading system (ETS), reported Bloomberg.

As EU member states sign off on a plan to further reduce emissions, France is pursuing a solution that would help firms avoid sharp increases in carbon pricing. The country thus requested national governments to support key parts of the European Commission’s planned carbon market overhaul.

The EU Commission wants to expand emissions cuts in the cap-and-trade scheme to 61% by 2030 as part of a huge package to align the economy with stronger climate targets. Carbon price reached a record around 100 euros per metric tonne in February as a result of the plan, forcing member states like Poland to demand more protection while energy-intensive companies worried about their global competitiveness.

The European Parliament and member states in the EU Council must both approve the ETS reform. While the EU parliament plans to vote on its negotiating posture next week, France hopes that environment ministers will agree on a unified approach at their meeting on June 28. The ultimate design of the revamp will be decided in discussions between the European Parliament, national governments, and the European Commission.

The French plan has no rules that would limit financial investors’ access to the market. Such measures were previously proposed by European Parliament legislators, prompting worries from the International Emissions Trading Association and warnings from the European Commission.

The Council would back a plan to phase out free carbon permits in industries covered by a proposed fee on emissions from products produced outside the EU. Free allocation, which is now intended at deterring company movement to regions with less rigorous climate rules, will be lowered over a 10-year period, decreasing 10% each year from 100% at the end of 2025.

These permits would instead be auctioned, and France suggested that these proceeds be used to enable exporters in the Carbon Border Adjustment Mechanism industries to adopt innovative technology.

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