NEWS: EU carbon market blurred by volatile prices and speculation, Greens warn
The EU needs to tackle design flaws and speculation on its carbon market to ensure the price of emissions remains high and becomes a more effective tool to drive decarbonisation, according to a report by the Greens in the European Parliament.
The carbon price on the EU emissions trading scheme (ETS) has risen sharply over the past year, reaching heights that weren’t expected until the end of the decade.
But while a high price for emitting climate-warming carbon is good, the volatility of the CO2 price on the carbon market needs to be addressed or there are risks of jeopardising the decarbonisation effort, according to Marie Toussaint, a Green lawmaker in the energy committee and group co-president Philippe Lamberts.
“Although the EU ETS is the cornerstone of the EU’s policy to combat climate change, it has contributed far too little to greenhouse gas emission reductions in the sectors covered since its inception in 2005,” Toussaint and Lamberts write in a foreword to a new report on the EU carbon market.
“Unless the European Parliament and the Council agree to tackle the structural flaws of the EU carbon market, our common future could therefore be seriously compromised,” they warn.
An independent report commissioned by the lawmakers found design flaws on the EU carbon market mean it is not fit for purpose, despite the EU lauding it as a key instrument to drive reductions in emissions. According to the European Commission, “since the EU ETS was introduced in 2005, emissions have been cut by 42.8% in the main sectors covered: power and heat generation and energy-intensive industrial installations.”
But flaws in the design of the EU carbon market have undermined its effectiveness, according to the report by Frédéric Hache, former financial market professional, independent consultant and director of the Green Finance Observatory.
Those include a surplus of emissions allowances in the first phases of the market’s launch, free pollution permits given to companies in order to prevent them from leaving Europe, and a lack of precautions against speculation.