Parliament votes against backloading ETS permits

Brussels, 16 April – The European Parliament has today voted down the Commission’s proposal to ‘backload’ carbon permits in the Emissions Trading Scheme (ETS). A majority in the Parliament felt that interfering in the system would undermine confidence in the ETS, despite the desperate need to increase the cost of carbon permits to meet climate change targets.

Brussels, 16 April – The European Parliament has today voted down the Commission’s proposal to ‘backload’ carbon permits in the Emissions Trading Scheme (ETS). A majority in the Parliament felt that interfering in the system would undermine confidence in the ETS, despite the desperate need to increase the cost of carbon permits to meet climate change targets.

The carbon permits – often called ‘polluter’s permits’ – require those who produce CO2 to pay for what they release into the atmosphere. By setting a maximum level of CO2 release, but allowing the sale of unused permits, there is financial incentive for firms to cut their emissions. However, initial flaws in the ETS led to the release of too many credits, causing their value to drop sharply. Backloading – withholding the release of credits into the carbon market – would have lifted their value, returning financial incentives for carbon reduction efforts.

MEPs narrowly rejected the Commission’s proposal, with 344 voting against, 315 in favour and 63 abstaining. Some MEPs pointed out that backloading is merely a way to make the system work as intended. Others argued that a functioning ETS would reduce European competitiveness, despite evidence to the contrary that high carbon prices increase investments in clean-technology; a prime source of economic growth capable of reducing energy prices in the long-term.

“The Commission remains convinced that backloading would help restore confidence in the EU ETS in the short term until we decide on more structural measures”, said Climate Commissioner Connie Hedegaard, after the defeat. “We will now reflect on the next steps to ensure that Europe has a strong EU ETS.”

The legislation will now return to the European Parliament’s Environment committee, and the text will also be considered by the Council of Ministers. The Irish Presidency of the Council has reacted to the EP vote by increasing their efforts to bring member states onboard with the Commission’s proposal, pointing out that the proposal is subject to the co-decision procedure.

Click to read the press releases from the European Parliament, the European Commission, and the Irish Presidency of the Council of the European Union.

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