Revising the ETS directive Damien Morris Head of Policy 18 - PowerPoint PPT Presentation

Revising the ETS directive Damien Morris Head of Policy 18 February 2016

The EU has overachieved its 2020 climate targets EU GHG Emissions versus 1990 0% -5% -10% Already -23% in 2014 -15% -20% -25% -30% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 EU GHG emissions 2020 GHG target

Evolution of the ETS carbon price 35 30 25 20 € /tCO2e 15 10 5 0 10/01/2006 10/01/2007 10/01/2008 10/01/2009 10/01/2010 10/01/2011 10/01/2012 10/01/2013 10/01/2014 10/01/2015 10/01/2016 2

Two years’ gains lost in six weeks 9 8 7 €/tCO2e 6 5 4 3

Sandbag recommendations 1. Increase ambition by tightening the ETS cap Cancel 1.5 billion from MSR in line with a 30% 2020 target • Start Phase 4 cap from lower starting point in 2021 • Change cap trajectory in line with a 50% 2030 target • 5 year trading periods to accommodate Paris ambition ratchet • 2. Restrict supply within ETS cap Protect MSR and carve 400 million New Entrants Reserve out Phase 4 cap • If correction factor is not triggered, direct any unissued free allowances to NER • More aggressive MSR parameters (e.g. withdrawal rate increased from 12%) • 3. Introduce more targeted carbon leakage protections Tiered carbon leakage list • Free allocation rises/falls for every 10% change in production from baseline • 4. Securing a strong and predictable carbon price Introducing price controls (floors, corridors, etc.) via the MSR or via primary auctions • 4