The European Commission has acted to rescue the European Emission Trading System (EU ETS) by proposing to postpone the auctioning of 900 million allowances from 2013-2015 to the next phase of the EU emissions trading system, which ends in 2020.
“We support this step. But back-loading only 900 million allowances is not enough to re-establish an effective carbon market in Europe,” says says Remi Gruet, Senior Adviser for Climate and Environment at the European Wind Energy Association (EWEA). “The Commission itself estimates the oversupply of allowances to reach 2 billion by the end of 2013.”
EWEA warns: with low carbon and coal prices, a switch from gas to coal is already happening in electricity production and the risk of new coal-fired capacity investments is very real. “We need a high and stable carbon price, which together with renewable energy targets, will drive investment decisions in the power sector towards wind energy and other renewables, rather than locking in fossil fuels for the next 40 years,” says Remi Gruet.
As the economic crisis continues, oversupply of emissions allowances is likely to be higher than anticipated by the Commission, especially given the recent decision on aviation.
“I urge the Members of the European Parliament and the EU Council to swiftly agree on the Commission’s proposal to backload allowances, and to enable a discussion on a long-term structural solution to the ETS,” adds Remi Gruet.