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Plans to reform the beleaguered carbon market could take shape within the next two weeks as the position of EU member states on the market stability reserve (MSR) is expected to clarify by the next European Parliament meeting.
The head of environment and sustainability at pan-European electricity group Eurelectric, Jesse Scott, told Utility Week that she is “optimistic” that a majority view on the MSR plans could take shape, guided by strong German leadership on the issue.
“There is a clear, strong German position which bodes very well indeed for progress on this,” Scott said.
Germany is understood to back plans to implement the MRS by 2017 rather than delay the reform to 2021 which Scott says would be the “worst possible thing for the market”.
The MRS would manage the release of allowances back into the market following the so-called ‘backloading’ plans which are in place until 2017.
Although Brussels policy makers have taken the decision to delay the supply of allowances into the market until 2017 through the backloading plans, the MSR plan would need to be in place immediately after this to prevent undoing any market benefit, Scott explained.
“It would be ludicrous to backload to 2017, reload to 2021 and then bring in the MSR,” Scott said.
The view is shared by the thinktank of Climate Change Capital which says an earlier implementation is needed because “low investor confidence in the carbon market needs to be restored as early as possible”.
The carbon market has been dogged by debilitating oversupply of carbon emissions allowances since the economic downturn, which has caused prices to fall to levels which give no clear financial incentive to developers of low carbon energy.
A resolution of the market reform programme is expected to send carbon prices higher, making low carbon energy options a more economic investment when compared to fossil fuels.
The countries involved are expected to make written submissions on the plans over the next two weeks before the next meeting.
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