EU Nations Said to Need More Time to Evaluate French Carbon Plan

European Union governments need more time to evaluate a French idea to introduce a price floor in the bloc’s carbon market and define their stances on the issue after initial talks, according to an EU official with knowledge of the matter.

It is too early to say if there will be enough support among member states for the concept of a corridor with a minimum price, an idea pushed by French Environment Minister Segolene Royal, said the official, who asked not to be identified because the talks are private. Royal, who presides over global climate talks until November, is seeking to boost the price of emissions to accelerate the shift to cleaner energy at home and at the EU level.

The French plan was most recently discussed at a May 12 meeting of a working group composed of representatives of national governments in Brussels, said a spokeswoman for the Council of the EU, the body that represents the bloc’s 28 member states. The proposal currently is not on the agenda of any upcoming meeting of the group, she said.

Many issues still need to be clarified, including a question of whether a price floor or a corridor is the best instrument to reach a higher carbon price, according to the EU official with knowledge of the talks.

The EU emissions trading system imposes decreasing emission caps on around 12,000 facilities owned by manufacturers and utilities, allowing those who reduce pollution faster to sell their carbon allowances. The price of emissions in the EU system, which has no price floor or ceiling, slumped around 70 percent in the past eight years as an economic crisis cut industrial output and aggravated a glut of permits.

A change to the design of the ETS, the world’s biggest cap-and-trade program, would require a legislative proposal by the European Commission, the EU’s regulatory arm, which would then need qualified-majority support from member states and majority backing from the European Parliament.

EU Climate and Energy Commissioner Miguel Arias Canete spoke against a price floor last month, defending the current design of the carbon market and highlighting the role of the market stability reserve, a mechanism that will alleviate the oversupply of permits starting in 2019.

“We went for the market stability reserve to avoid political or administrative tampering with prices,” Arias Canete said on April 19. “If we open a debate in Europe about floors and ceilings, for some people the floor will be the ceiling and it will be an impossible discussion. The commission thinks that the market stability reserve is the way forward and not to establish floors and ceilings,” he told the EU Parliament’s environment committee.

German Support

Royal said in an interview earlier this month that she is seeking German support for the minimum price plan. Germany, the biggest European economy, whose backing would help the proposal gain traction among other EU member states, has yet to take a position on the idea. While the German Environment Ministry headed by Barbara Hendricks is considering support for a price floor, Economy Minister Sigmar Gabriel has signaled reservations.

The French campaign was launched as EU governments started talks about a post-2020 reform of the ETS to adjust the market to tougher climate targets for the next decade. EU leaders agreed to increase the annual pace of emission reductions to 2.2 percent from the current 1.74 percent starting in 2021. Policy makers have said the more ambitious goal, together with the stability reserve, should boost the price of emissions.

There’s a broad agreement among member states that the reform of the ETS should lead to a carbon price which would encourage the transition to a low-emissions economy, the diplomat said. EU ministers will discuss the carbon market at their quarterly meeting on June 20.

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