Deep Divisions Mark the Start of EU Carbon Market Reform Talks

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Or sign-in if you have an account.(Bloomberg) — Talks about a reform of the European Union’s emissions market have kicked off with deep rifts among national governments, highlighting the challenge they face in reaching a deal by early next year. 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The review pits countries including Sweden, Spain and the Netherlands, which favor a rapid expansion of clean energy, against a bloc led by Italy, Poland and Greece, which is concerned about the cost of moving away from fossil fuels. Both camps say they have enough votes to block their opponents’ demands. “I think there’s an absolute recognition that the ETS is critically important,” said Darragh O’Brien, environment minister of Ireland, whose country is chairing the meeting as holder of the rotating EU presidency. He added he will aim for an agreement on the member states’ common negotiating position on the reform in December. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe commission has faced mounting pressure from governments and industry groups over carbon costs after the Middle East conflict raised energy prices, exacerbating concerns over Europe’s declining competitiveness compared with China and the US. To help secure backing for the reform, the EU sought to strike a balance in its proposal between lowering the burden of the transition for industry and encouraging those who decarbonize faster to keep investing in Europe. Still, for governments including Sweden and Finland the proposal is not strong enough. Earlier this month, the countries teamed up with Denmark, the Netherlands, Portugal, Luxembourg and Spain to call for ensuring an ambitious emissions-reduction trajectory and long-term investment predictability. “Sweden is frustrated and we’re criticizing the proposal,” Daniel Westlen, Swedish state secretary for climate and the environment, told reporters in Dublin. “It’s rewarding those that didn’t do their homework and didn’t do what they need to do to phase out fossil fuels.” Launched in 2005, the ETS imposes gradually shrinking emissions limits on around 10,000 facilities in sectors from steel and cement to fertilizers. The recalibration of the system is aimed at adjusting it to the EU 2040 goal of cutting carbon emissions by 90% from 1990 levels and reaching climate neutrality by the middle of the century.Earlier this week, the first meeting of ambassadors to discuss the reform on Wednesday in Brussels showed that member states are at odds over key elements of the proposal, including the pace at which the pollution limit for companies under the ETS shrinks every year, according to people with knowledge of the issue. Other sticking points include free carbon permits for industry, imported credits and the use of revenues from government auctions of emissions permits. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The commission proposed a 3.7% rate of annual cuts in the ETS emissions cap for 2031-2035, and 1.7% from 2036, a move that would allow the issuance of some permits after 2039, when the cap is set to drop to zero under current rules. The pace of the emissions cap reduction has become a polarizing issue, with more climate-conscious governments calling for the annual rate, known as Linear Reduction Factor, to be kept at the planned 4.4%. Others called for it to be cut even lower, below 3%. Last week, ten member states including Italy, Poland, Greece, Romania and Estonia called on the commission to extend the ETS cap closer to 2050, with the slower emissions-reduction trajectory to be introduced as soon as possible. Poland’s deputy climate minister Krzysztof Bolesta said Friday that he would be repeating the demands the countries made in their letter at the meeting with his counterparts in Dublin.“We absolutely need to help the industry to decarbonize, otherwise, we will lose our industries to China and other countries,” he told reporters. “And we need to reform the market in a way that guarantees affordable prices for energy for our citizens.”The proposal by the commission is now set to be debated by member states in the EU Council and by lawmakers in the EU Parliament in two parallel tracks, with each institution entitled to propose amendments. Once they agree their respective negotiating positions, their representatives will meet with the commission in a format known as trilogue to iron out the final shape of the reform. The EU aims to finalize the legislative work by the end of the first quarter of next year.—With assistance from Jennifer Duggan and Jorge Valero.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.