Carbon Seen by Hendricks Set to Recover Once EU Agrees on Reform

Carbon-permit prices in the European Union’s emissions trading system will rebound once policy makers agree on a “sustainable” overhaul of the market, according to German Environment Minister Barbara Hendricks.

She commented by e-mail on the EU proposal to introduce a carbon-market stability reserve, talks on 2030 climate and energy policies, and the effect of the crisis in Ukraine.

ON TALKS ABOUT EU 2030 CLIMATE AND ENERGY PACKAGE:

“It is true that the issue of effort-sharing will play an important role in the discussions on the 2030 framework for climate and energy. The European Council of March 2014 has identified the distribution of efforts under a potential 2030 climate target as one of the main topics requiring further work and discussion in order to reach an agreement as soon as possible, and by the latest in October 2014. Work in the council and the commission is currently under way to come to an appropriate solution.

‘‘I am convinced that we will need to continue taking distributional aspects into account when deciding the 2030 effort-sharing. While cost efficiency will surely play a major role in allocating targets and efforts, we cannot disregard equity concerns if we want to achieve an overall agreement. Thus I believe that we will need an approach which combines cost efficiency with equity concerns.’’

ON EU CARBON-MARKET REFORM

‘‘It is true that I suggested launching the market stability reserve already as soon as 2016. From my point of view, this should also include to shift the so-called backloading volumes into the reserve. Both measures would help to strengthen the EU ETS quickly and sustainably. The German government has no final position on these details yet, but we are confident to come to an agreement soon.

‘‘According to what I hear so far from my colleagues in other member states, there seems to be a lot of support for measures to strengthen the EU ETS already before 2020. People seem to recognize that we cannot wait another six years to reform this flagship instrument of European climate policy.’’

ON CARBON PRICES:

‘‘The developments in the last years demonstrated the difficulties in forecasting carbon prices for a number of years in the future. It is totally clear current carbon prices are too low to spur investments in low-carbon technologies. And given the existing surplus, it is highly unlikely that this will change in the near future without a sustainable reform of the EU ETS. Only such a reform can provide clarity for industry again to invest in clean technologies. I’m sure that once we have decided on such a reform, this will be quickly reflected in market prices.

‘‘From my point of view, price floors or ceilings are not a helpful solution to tackle the existing surplus, nor will they provide more flexibility in the market system to deal with unforeseen developments in the future. Price floors or ceilings do systematically not fit in market-based systems. I therefore prefer a rule-bound, volume-based mechanism, as it is represented by the market stability reserve proposed by the EU Commission.’’

ON ENERGY SECURITY AND UKRAINIAN CRISIS:

‘‘We definitely feel the impact of the Ukrainian crisis and the ensuing energy-security concerns in the debate on a 2030 climate and energy framework. By definition, this framework influences the way our energy system is structured. Thus it potentially impacts energy security.

‘‘I am convinced that we must continue to take an integrated approach to climate protection and energy security, not because of some artificial link, but because they are inextricably interwoven. By progressing on energy efficiency, renewable energies and climate protection, we make ourselves more and more independent from energy imports, while reducing greenhouse-gas emissions at the same time.’’

To contact the reporter on this story: Ewa Krukowska in Athens at ekrukowska@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Dan Weeks, Sharon Lindores

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