EU ETS: A balancing act between environmental ambition and - - PowerPoint PPT Presentation

EU ETS: A balancing act between environmental ambition and industrial protection?

Suzana Carp

EU Engagement Lead

11 April 2017

EU ETS – A Cap & Trade system

• The cap (Emission Reductions):
• defines the level of ambition;
• creates constrain/scarcity on the market.
• The Trading element (Cost-effectiveness):
• Drives emission cuts to where they are cheapest;
• Leads to price discovery;
• Creates equivalence despite difference in national landscapes

(presupposes a functioning market).

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• Art. 191(2) TFEU
• 1. The polluter pays principle enshrined in the EU

Treaties, constitutes the legal basis for this form of pricing on emissions.

• 2. Derogations from the Principle can only be

introduced on a temporary basis (is 25 years still temporary?)

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EU ETS – The CAP

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1600 1650 1700 1750 1800 1850 1900 1950 2000 2050 2100 2013 2014 2015 2016 2017 2018 2019 2020

MtCO2

Mind the Gap: Emissions versus Cap

Actual EUETS emissions Cap

Sandbag forecast 1754Mt

• 9%
• 11%

Preliminary ry data sh shows em emissio ions in in 2016 down 2.7 .7% compared to LRF of f 1.74% - str tructural su surplus ab above 3Bt for th the fir first ti time

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• 500

500 1000 1500 2000 2500 3000 3500 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mt CO2e

Surplus available to market Backloading Total surplus

The Trading component of the EU ETS

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Prices in the EU ETS

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Comparing percentage change from 2008 emissions levels for power and for non-power in aggregate across all countries under the scope of the EU ETS

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ETS Reform – EP draft and Council

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• 500

500 1000 1500 2000 2500 3000 3500 4000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Stationary installations, Mt Cumulative surplus Cumulative MSR Cap Historic Emissions Emissions Forecast

Council reform proposal

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Free allocation on the rise – Phase IV

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Conclusions

• Cap under the EU ETS is not driving decarbonisation in

the EU;

• The trading component takes place on a hybrid market

(partially a market, partially using free allocation);

• The price of EUAs is closer to irrelevance than to

relevance;

• Reform proposals on the table don’t address the

fundamental problem;

• National measures will be increasing.

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