No white smoke from ETS conclave

Ministers end lunch discussions of backloading proposal with no signal of support.

Environment and energy ministers meeting in Dublin today (23 April) were unable to agree on any signal of support for the European Union’s Emissions Trading Scheme (ETS) after it was dealt a potentially lethal blow by the European Parliament last week.

The ‘bridge’ lunch with 40 energy and environment ministers was the main venue for discussing the issue. Energy ministers will continue discussions on the sidelines of their meeting tomorrow, but no strong show of support is expected.

Investors in the carbon market, as well as environmentalists and energy companies, had hoped that a strong signal could revive the European Commission’s proposal to ‘backload’ allowances in the scheme in order to raise the flagging price of carbon. The proposal was rejected one week ago (16 April) by just 19 votes. It was referred back to the Parliament’s environment committee, which has two months to make changes and put the proposal to a vote again.

Yesterday morning, MEPs on the committee said only a signal of support from member states would enable the proposal to be put to another vote. A majority of member states support the proposal. But the political situation in Germany has prevented that government from taking a position. Without German support it is unlikely the proposal could pass.

German environment minister Peter Altmaier, from Chancellor Angela Merkel’s CDU party, supports the backloading proposal. But economy minister Philipp Roesler, from the CDU’s coalition partner FDP party, is adamantly opposed. With German elections coming up in September, it is thought Merkel does not want to risk causing a rift in the coalition, or angering heavy industry, which is against the proposal.

No quick fix

The parliament’s rejection of the proposal last week caused the carbon market to drop by its fastest rate ever, falling by over 40% to a record low of €2.46. The price of carbon in the emissions trading scheme was expected to be around €30 at this time. Analysts say that unless the price goes up, the ETS will not lower emissions or stimulate investment in green technology, and could actually incentivise investment in coal-fired power plants.

It was hoped last week that the risk of a complete collapse of the EU ETS would force the German government to come out with a statement of support for the proposal, despite the political difficulties. But Altmaier said yesterday that instead Germany will most likely wait until after a second parliament vote.

“We should use the two month delay we now have in the environment committee,” he said. “In the mean time, what we need is a public debate.”

Last week Irish environment minister Phil Hogan asked the Commission not to withdraw the proposal in response to the Parliament’s vote, noting that member states had not yet made their position known. This raised hope that a signal of support could be sent at the Dublin meeting. But yesterday Hogan said that the ball remains in the Parliament’s court.

“They have to act first,” he said. “The matter is for the European Parliament, not for the council at the moment.” He said the Council needed to give the Parliament space to make a decision.

Connie Hedegaard, European commissioner for climate action, said today that “it’s still early days for the European Parliament to digest their own vote.”

But members of the environment committee said a Council signal is needed before the Parliament can take a vote. “We need new dynamics in the council in order to make sure that the environment committee in the end can…put the position of the council back to the plenary and vote once more,” said Dutch Green MEP Bas Eikhout.

The proposal involves only a one-sentence addition to the existing ETS directive, which would give the Commission the ability to withhold allowances for a limited period of time. “What can the environment committee do?” asked Eickhout. “It’s a one line change. Finding a compromise there is difficult. We need other dynamics in the other institutions.”

Member states will continue discussing the issue in the coming weeks at working group level, and it is set to be an item on the agenda at the environment council in Brussels on 18 June. It may also be bumped up to heads of state level to be discussed at the European Council on 22 May, Altmaier said.

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