Denmark floats alternative to EU’s carbon market fundraising plan

(EurActiv, 18 Jul 2022) European Union countries are considering alternatives to an EU plan to use a carbon market reserve to help finance their exit from Russian gas, as some fear the proposal would undermine the bloc’s main climate change policy.

The European Commission published plans in May to end the EU’s reliance on Russian gas this decade, including a proposal to raise €20 billion by allowing countries to sell carbon permits stored in the Emission Trading Scheme’s (ETS) “market stability reserve”.

The reserve began operating in 2019 to tackle a problem of oversupply that for years weighed on carbon prices.

But the plan to draw from the ETS reserve was criticised by analysts who warned it risks undermining trust in the EU’s carbon market.

In response, Denmark has now put forward a counter-proposal to the Commission’s plan that it says treats the carbon market like a “printing press” for money, rather than the bloc’s core tool for cutting greenhouse gas emissions.

“This risks undermining the hard-earned trust of the market in the ETS as a credible, rules-based instrument to deliver the EU’s climate targets cost-effectively,” said the proposal, seen by EURACTIV.

“It will create further political risk for investors and have negative impacts on the carbon price,” the paper warns

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EurActiv, 18 Jul 2022: Denmark floats alternative to EU’s carbon market fundraising plan