European Union member states will push for more free carbon allowances for major industries to better protect companies struggling with tough global competition and rising energy costs.
The bloc’s 27 member states will this week seek to agree on a plan to change so-called carbon efficiency benchmarks, which determine the allocation of free permits to the end of the decade in the bloc’s Emissions Trading System, according to a document seen by Bloomberg News.
The benchmarks have been a point of contention between the European Commission, the bloc’s executive arm, and energy-intensive industries concerned about stiff competition from companies located in regions with laxer climate policies. The commission this year proposed a fast-track revision of the rules, which are being debated by member states and the EU Parliament.
On Wednesday, member states’ ambassadors will discuss a proposal put forward by Ireland, which holds the EU’s rotating presidency.
The country wants to make available more free allowances for companies that rely on two “fallback” benchmarks for heat and fuel. The additional permits to be handed out up to 2030 will come from a pool of 33 million allowances that remain unallocated because companies applying for them failed to meet certain requirements.
According to Ireland’s proposal, the two benchmarks’ “average values” would be reduced by 9% compared with the 2021-2025 period, the document shows. That would be a smaller cut than that proposed by the commission and would translate into more free permits for companies.
If adopted, the proposal will inform the states’ position for talks with the EU Parliament about the final shape of the regulation.
In essence, the benchmark values represent the carbon efficiency of the bloc’s best-performing plants and factories. If a facility is as “clean” as the benchmark, it receives enough free permits to cover its emissions. The commission updates the benchmarks every five years to ensure that the free allocation rewards efficiency while incentivizing industry to rein in emissions.
‘Swift Agreement’
“On Wednesday, the Irish presidency will seek agreement in Council on the proposal for revised values for ETS heat and fuel benchmarks,” the presidency said in a statement. “Reaching swift agreement on this important proposal is a priority.”
At the same gathering, EU nations are also due to agree their position for talks on a revision of the Market Stability Reserve, a mechanism that controls the supply of carbon permits.
Back in April, the commission proposed scrapping a rule that invalidates surplus permits kept in the MSR and making those permits available for release in the event of large price swings.
Ireland plans to seek amendments to that proposal to keep more allowances available to the market. Surplus permits absorbed into the MSR would be kept there only until the end of 2030. After that, the reserve would be permitted to hold as many as 800 million allowances — double the current threshold — with any allowances above that limit invalidated.
Photo: Photograph by James Jordan/Getty Images
Topics Europe
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