On Thursday 22nd, the European Parliament Industry Committee (ITRE) will vote on the Market Stability Reserve proposal. You can watch it the vote here.
Without an early start to the reserve (2017) and a solution to the problem posed by the return of the backloaded and unallocated allowances, the carbon price will crash, plunging the future of the Emissions Trading Scheme into doubt.
The Commission expects that the inflexibility of the ETS's supply will cause the surplus to rise to 2.6 billion tonnes of allowances by 2020. Our projections, using more recent data, show that the surplus is on track for 4.5 billion. Not only would this make Europe's climate policy an international laughing stock, but it would also necessitate the introduction of additional instruments to cut emissions.
Sandbag's MSR tool shows how the surplus will continue to grow to 2020, crashing the EU carbon price
Europe should remember the reasons why it adopted an ETS in the first place: The single level-playing field it creates should guarantee emissions are reduced in the cheapest possible way. This avoids the imposition of a mosaic of unpredictable, inflexible and costly national policies.
Sandbag has co-designed a full set of voting recommendations, but the most important for ITRE are to:
- Start the MSR in 2017
- Prevent the backloaded allowances from returning to the market
This will help prevent the carbon price from collapsing, and avoid locking in carbon-intensive investments for decades to come.
To find out for yourself what each amendment does to the ETS surplus, use our online MSR tool.