Lead EU lawmaker proposes carbon market rules to respond to price spikes

(EurActiv, 16 Feb 2022) The European Parliament’s lead lawmaker on reforms to the EU carbon market on Wednesday (16 February) proposed rules to make it easier for policymakers to intervene in the scheme if prices rise too fast.

European Union policymakers are preparing to negotiate reforms to the market, the bloc’s core policy tool for curbing emissions. The EU emissions trading system (ETS) contains a gradually decreasing amount of CO2 permits that power plants and industry are required to buy to cover their emissions.

The price of permits soared by around 150% last year and leapt to record highs of €98.49 per tonne of CO2 last week. Benchmark EU carbon prices fell by around 2.5% on Wednesday to €88.79 a tonne.

German lawmaker Peter Liese, who is drafting the European Parliament’s position on the reforms, on Wednesday proposed an amendment that would lower the bar for policymakers to release more permits at times of rapid price rises.

“High carbon prices have led to concerns regarding excessive price increases and market volatility. Any intervention, however, should avoid price shocks or sudden volatility,” Liese said in his justification for the amendment.

Article 29a of the current ETS rules allows countries to add extra permits to the market only if the CO2 permit price is, for at least six months, more than three times the average price in the two preceding years, and if policymakers conclude this does not reflect market fundamentals.

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EurActiv, 16 Feb 2022: Lead EU lawmaker proposes carbon market rules to respond to price spikes