EU agrees to reform bloc’s carbon market

THE EU struck a deal yesterday to overhaul Europe’s carbon market after 2021, hailing it as a key step towards meeting its pledges to cut greenhouse gases under the Paris climate agreement.

The European Parliament and the member states reached a tentative agreement to reform the world’s biggest carbon market, but environmental activists said the overhaul would have no effect for years.

“Today’s landmark deal demonstrates that the European Union is turning its Paris commitment and ambition into concrete action,” European Union Climate and Energy Commissioner Miguel Arias Canete said.

The deal must still be formally approved by the European Parliament and the member states.

The EU Emissions Trading System puts a cap on the amount of carbon dioxide allowed to be emitted by large factories and other companies.

The firms can trade in quotas of these emissions -- the idea being to provide a carrot to improve energy efficiency or switch to cleaner sources so that they keep within the ceiling.

However, critics said the carbon market, which covers about 40% of Europe’s industrial emissions, has proven ineffective.

Carbon allowances were too generous, resulting in a carbon price too low to encourage savings.

Members of the European Parliament had pushed for more ambitious changes than those proposed by the commission.

The commission said it accepted significant changes to the system to speed up emissions reductions and strengthen the Market Stability Reserve.

The MSR is designed to help ensure that carbon dioxide prices spur innovation in the field of energy efficiency.

The moves aim to reduce the oversupply of allowances on the carbon market.

The commission also agreed to new safeguards for European industry if needed to reduce the risk of carbon leakage.

It also backed ways to help the industry and power sectors make the needed innovations and investments to transition to a low-carbon economy.

The WWF activist group said the deal made the EU’s pledges to the Paris pact look meaningless by paying heavy industry to continue polluting.

The WWF’s Sam van den Plas said it was a relief for the EU to lower the supply of ETS allowances but regretted it would take at least five more years to take effect.