EU ETS fix compromise falters

OREANDA-NEWS. A compromise for an earlier 2019 start for the EU emissions trading scheme (EU ETS) market stability reserve (MSR) has fallen through after the Conservatives and Reformists (ECR) withdrew their support for the proposal.

"Technically, it is no longer possible for the amendment to be tabled because for an amendment to be considered, it needs the support of at least two parties," said Alliance of Liberal Democrats of Europe (ALDE) member, Fredrick Federley.

The European Parliament's industry committee (ITRE) will now have to choose between a 2017 or 2021 start for the EU ETS reserve on 22 January when they vote on two sets of amendments that have been tabled separately.

One set of amendments — put forward by the Socialists and Democrats (SD), ALDE, the Greens and the European United Left/Nordic Green Left (GUE/NGL) group — will propose a 2017 start for the EU ETS reserve. This is in line with the position of some EU member states, notably Germany, the UK and France which are in favour of an earlier start.

But a proposal jointly tabled by the European People's Party (EPP) and the ECR will revert to the European Commission's originally proposed start date of 2021. The commission proposed last year that an EU ETS reserve should be introduced to gradually reduce the current 2.1bn oversupply of allowances to 400mn-833mn by capturing 12pc/yr of the total excess.

The proposed 2019 launch date initially formed part of a set of consolidated compromise amendments tabled by ITRE rapporteur and European People's Party member, Antonio Tajani. But Tajani made the offer of a 2019 start conditional on adequate support for all components of the deal, including an innovation fund to help spur the development of low-carbon technologies.

Under Tajani's proposal, 300mn back-loaded allowances would be put in the innovation fund and 600mn transferred directly into the MSR. But a lack of ECR support for the deal in its entirety resulted in it being withdrawn.

The ECR group is very split over certain aspects of the MSR proposal, with some members of the UK Conservative Party favouring a 2017 start, Federley said.

By contrast to the EPP, the SD, ALDE, Greens and GUE/NGL group want all back-loaded allowances to go directly into the MSR. They want the innovation fund, which they support, to be populated with half of the 600mn unallocated allowances currently residing in EU government reserves rather than back-loaded permits, as proposed by the EPP.

Members of the EPP will meet tomorrow to finalise their position.

Although the vote on 22 January looks set to be very tight, Federley expressed optimism that a 2017 start could be approved by a tight margin.

Federley calculates that 36 MEPs are likely to vote in favour of an earlier start compared with the 34 votes needed for a majority in ITRE. This is based on his expectation that two SD and two EPP members will vote against their own party's position.

But the outcome will be so tight that it could easily be swayed by abstentions or absences because of illness, for example, Federley said.