MEPs vote against ETS reform

MEPs voted today against a reform of the ‘emissions trading scheme’ (ETS), an EU project designed to cut carbon emissions. The decision has been called a ‘monumental failure’ by environmental activists.

The ETS is a market which relies on permits, also known as ‘carbon credits’, to limit the pollution from member states. Companies can purchase a permit to allow a certain amount of a specified pollutant to be emitted. There is currently a surplus of carbon permits available in the market, which prevents the effective reduction of carbon dioxide emissions.

The reform of the ETS, known as ‘backloading’, would have raised the price of carbon credits by postponing several auctions, where companies are able to purchase permits from their member states. The reform would have remained in place up until 2020.

Making the EU ETS fit for purpose would have sent a clear signal to investors that they can begin to invest in low carbon technologies with confidence.

MEPs voted 334 to 315 against the proposal, preventing it from passing, and the reaction from both environmental activists and investors has generally been negative. Stephanie Pfiefer, executive director of the Institutional Investors Group on Climate Change, said: “We are disappointed that MEPs have voted against the backloading proposal. The ETS in its current guise may be flawed, but an EU-wide emissions trading scheme is an important mechanism.

“Structured correctly such a mechanism can provide the long-term policy certainty necessary to drive low-carbon investment and reduce emissions.” She added.

However, opponents of the reform have stated that withholding carbon credits could damage confidence in the ETS as a whole. There was also a danger that the increased cost of carbon emissions would manifest itself in consumers’ energy bills.

Although backloading was only intended to be a temporary solution, the short-term rise in the price of carbon could have led to investment in energy-efficient technology, which would help firms in the future.

Anthony Hobley, president of the Climate Markets and Investment Association, believes that the ETS needs significant changes in order to stimulate research and innovation as it did in it’s early years.

Hobley stated: “We have reached the stage where EU ETS has ceased to be an effective environmental tool and has instead become an exercise in moving electronic permits from place to place.

“Making the EU ETS fit for purpose would have sent a clear signal to investors that they can begin to invest in low carbon technologies with confidence.” He added.

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