Yesterday the European Parliament Environmental Public Health and Food Safety Committee (ENVI) gave a mandate for the trialogue with the European Council and Commission on the market stability reserve. Federal Environment Minister Barbara Hendricks commented:
"The foundations have been laid down in the European Parliament for adopting the urgently needed reform of the EU emissions trading scheme. The compromise aimed for addresses our key requirement of rapidly reducing the surpluses in emissions trading. In particular, backloading volumes (900 million allowances) will be transferred directly to the market stability reserve. This is a major achievement. I am confident that we will respond quickly in the Council to the European Parliament proposal and clear the way for a speedy and ambitious emissions trading scheme reform."
Background
The current surpluses of over two billion EU emissions trading allowances negatively impact on the scheme's incentive effect, thus endangering the energy transition and the cost effective achievement of national and European climate targets. The holding back of allowances (backloading) was merely a first step to allow for more time to implement a structural reform. On 23 and 24 October 2014, the European Council adopted such a reform in principle within the framework of key points of the 2030 EU climate and energy package: a market stability reserve (MSR) will be introduced that, based on a set of rules, will control the annual allowances budget. In the case of excessive surpluses, allowances will be reduced and put into the reserve. Should there be a major shortage then surplus allowances can be auctioned from the reserve.
The German Government supports the BMUB initiative to introduce the market stability reserve put forward by the European Commission as soon as 2017 and to transfer the allowances held back under the backloading scheme completely and directly into the reserve, thus removing them from the market. This will quickly restore the appeal of emissions trading and ensure it is a viable instrument for the future.
Negotiations are currently in the decisive phase. On 24 February, the lead ENVI Committee issued an early mandate for the trialogue of the European Parliament, Council and Commission. Now it is up to the European Council to swiftly adopt an ambitious position. A clear majority has not yet been reached within the Council. Should the European Council succeed in adopting a position soon, then the trialogue can get underway in March. This would mean that the process could be concluded by late spring this year.