Senior MEPs are calling for more ambitious reform in Phase IV of the EU ETS due to the current low price of carbon allowances. During a closed-door meeting, Ian Duncan and six senior MEPs representing the main political groups reached a near agreement on pushing for more ambitious reform, according to Carbon Pulse.
The group proposed two major changes that will significantly impact the future price of carbon. Firstly, they suggest a steeper annual reduction in the cap governing the total amount of allowances available. This would lead to faster reductions in allocations compared to the original proposal. The aim is to align the EU with the goals of the Paris Agreement, limiting global warming to 2 degrees Celsius or lower. Secondly, they propose a "rebasing" of the cap, setting it based on 2018-2020 verified emissions instead of using 2010 levels as the baseline. This shift would result in a substantial reduction in available EUAs (both for free allocation and auctioning) from the start of Phase IV, compensating for emissions reductions caused by overlapping renewable energy and energy efficiency policies.
When combined with the market stability reserve (MSR), these amendments would lead to a smaller cap and a rapid reduction in the oversupply that has plagued the market during Phase II and III.
Ian Duncan MEP, responsible for shaping the future of the EU ETS, will deliver the keynote address and hold a question-and-answer session on his proposed Phase IV reforms at the Carbon Forward 2016 conference on October 13th in London.
