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Carbon markets convergence to wait until next decade – EC

CO2

20 Jul 2021 13:57

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Bonn

20 Jul 2021 13:57

(Montel) The European Commission does not expect to merge its proposed emissions trading scheme for transport and heating with the EU’s existing carbon market this decade, a senior official said on Tuesday.

“We indeed see the possibility in the long term for the two systems coming together and having only one price, but this will be way into the next decade,” said Kurt Vandenberghe, a director of policy at the commission’s research and innovation directorate.

Vandenberghe told a webinar that a single carbon price was efficient in theory but came with disruptive social effects. The webinar was organised by the European University Institute school of transnational governance.

The EC last week proposed a carbon pricing scheme for transport and buildings that would operate separately but adjacently to the existing carbon market from 2026.

This has attracted criticism from some concerned about the impact of raising the costs of transport and heating for Europe’s poorest citizens. Others have feared the inclusion of the new sectors would drive carbon prices sharply higher for power production and industrial goods.

“We did not want to set up one system for all sectors because we do not want to erode the integrity of the existing ETS for energy and large industry. That works well and we don’t want to undermine or question that dynamic there,” Vandenberghe said.

The EC’s drive to provide compensation ahead of the new scheme struck a welcome balance between social cohesion and cost-effective emissions reductions, said energy economist Ottmar Edenhofer of the Potsdam Institute for Climate Impact Research.

“It is a comprehensive package with very important cornerstones.”

No cap mechanism
Others have expressed disappointment with last week’s proposals to align the carbon market’s parameters with a goal to become carbon neutral by mid-century.

The plans risk limiting the carbon market’s effectiveness in driving investments needed to address climate change, according to climate think tank Sandbag.

“Despite calling itself a cap-and-trade system, the EU ETS has no mechanism to keep emissions below its ‘cap’,” the group said in a statement late on Monday.

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