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EU carbon market reform will start at the end of 2018, helping to boost carbon prices and encouraging a switch to green energies.

In February, the European Parliament has approved a reform that will become effective at the end of 2018 and will prop up the EU's Emissions Trading System (ETS), the world's biggest carbon market, by taking 1.6bn surplus allowances off the market and putting them into a market reserve. The reform comes as a reaction to the current 2bn allowances flood that has led to an excessively low carbon price of €7 per tonne, which doesn’t encourage power companies to switch to greener fuels, and could drive carbon prices up to €20 per tonne by 2020.

Many believe that the reform should enter into force earlier and that delays will only create uncertainty among investors and allow further carbon allowances surpluses to stockpile, but, as Labour MEP Seb Dance has pointed out, the deal represents a significant improvement on the start date of 2021 previously proposed by the Commission.

Seb Dance also guaranteed that the number of unallocated allowances will be reduced and won’t be brought back into the market, but environmentalists object that 400m carbon credits will slowly return on to the market by 2030, and 300m allowances will go to an innovation fund with no proven low carbon credentials.

The EU expects carbon markets to play a major part in international emissions cutting efforts, and is counting on the coming up Paris summit to create a system to guarantee that left-over carbon allowances can’t prejudice emission reduction targets.

In the UK, there is a carbon floor price of £18 a tonne from April, and this gets British prices closer to the €30 a tonne price that had been imagined when the ETS came into force, facilitating a switch from coal to gas.


The gLAWcal Team

EPSEI project

Wednesday, 25 February 2015

(Source: Guardian)