Key EU lawmaker seeks tougher rules for carbon price mechanism


Key EU lawmaker seeks tougher rules for carbon price mechanism


Peter Liese, a German Christian Democrat and member of European Parliament, is pushing for stricter controls to refrain the bloc’s carbon prices from growing too quickly. Following his remarks, the benchmark December 2022 contract was traded at 91.54 euros per tonne, down 5.5% from the previous day's close.

Liese, leader of the EU Emissions Trading System reform in the European Parliament, expressed his intention to make amendments to existing measures in the bloc's cap-and-trade program next week to curb excessive price growth.

Emissions licenses in the EU have increased in value by roughly 150% in the last year, with prices hovering around 100 euros per metric ton. Energy-intensive sectors, which are often significant pollutants, have expressed concerns that the price hike is hurting their competitiveness, and several member states have demanded action.

The price of emissions, according to Liese, is primarily driven by ambitious climate measures in the European Green Deal and an extraordinary energy crisis, which has led natural gas prices to spike due to supply shortage and thus boost demand for emission allowances, as more utilities switched to carbon-heavy coal.

The existing system allows the bloc to act in the event of price spikes, but the scheme didn’t get triggered by recent rally. A modification is thus needed to change the system, stated Liese.

According to ETS rules' article 29a, to prevent excessive CO2 price rises, member states are allowed to add extra permits to the market if the CO2 permit price is more than three times the average price over the previous two years for at least six months and policymakers consider that this does not reflect market realities. However, the article has never been used.

Liese intends to submit his proposal by February 16. To be authorized, it would need the approval of a majority of parliamentarians and a weighted majority of member states. In the following months, the parliament will vote on Liese's proposal, and begin negotiations with EU members.

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