EA Ireland

Eurelectric – Letter Defending the ETS

Eurelectric – Letter Defending the ETS

originally published in our Industry Update newsletter on February 25th 2022

Ahead of ESMA’s final report on the EU Carbon Market (which is due to be released by end of March this year), Eurelectric has published a letter (15/02) to the European Commission defending the current structure of the ETS scheme against the rumoured forthcoming and potentially harmful changes this year.

The letter outlines the rationale of Eurelectric (along with other industry bodies) to retain the Emissions Trading Scheme, in its current form. As it currently stands, Eurelectric believes the ETS enables confident participation coupled with strong market signals, a direct result of the regulatory certainty the ETS in recent years has promoted. This indicates that the current ETS, is a functioning and resilient market. Moreover, the letter states that the ETS is finally fit for purpose, in that it is now achieving the level of emissions reductions it targeted from its conception, in line with EU climate policy objectives. However, this could be under threat with the potential changes.

The  ‘cap and trade’ system is valued for its successful contribution to EU climate policy so far. With increased ambition since its initial launch, emissions reductions are now targeted at 61 per cent by 2030 compared to 2005, an increase from the former 43 per cent.

Eurelectric is markedly against introducing position limits or hindering participation of ETS actors, be they financial or non-financial as it would increase both the costs of the market as well as bringing uncertainty. However,  Eurelectric does welcome further transparency of the market’s functions as outlined in the Oxera report, as well as coordination arrangements that would improve the ETS market surveillance and monitoring.

For now, the letter remains an anticipatory defence against the potential changes. ESMA’s release in March will perhaps determine if these worries, come to fruition.