Sandbag is a UK based not-for-profit organisation campaigning for environmentally and economically effective climate policies, with a focus on the EU Emissions Trading System (ETS).
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posted by Damien on 16th Jul 2014

Press release: for immediate release

Having recently cancelled allowances from its national carbon budgets, the UK Government now calls on the European Commission to do the same. In a new position paper published today, the UK government reasserted its support for cancelling “an ambitious volume” of carbon allowances from the EU Emissions Trading Scheme, indicating that the legislation currently initiated by the European Commission to fix the policy was inadequate.

The EU ETS, covering half of Europe's greenhouse gas emissions, is currently oversupplied by more than 2 billion tonnes worth of spare carbon allowances, equivalent to an extra year’s worth of emissions. To address this the European Commission has proposed introducing a “Market Stability Reserve” from 2021. This reserve would temporarily remove carbon allowances when there is a large oversupply as we see now, and return them to the market if they are needed later [1].

In the document released today the British government states that this proposal “does not constitute the comprehensive reform of the EU ETS the UK would like to see as it does not correct the problem of oversupply in the EU ETS, and as such is insufficient to put the System on the right track once and for all.” The document goes on to say, “The UK continues to call for cancellation of an ambitious volume of allowances to reduce the current surplus and help restore the balance between supply and demand.” [2] This follows moves last month to cancel 36 million spare tonnes out of the UK's national carbon budgets under the Climate Change Act. The UK was only able to cancel half of the excess in its first carbon budget because it was unable to unilaterally correct for a further 37 million spare tonnes that were within the EU ETS [3]. This is because any tightening of the supply of allowances in the EU carbon market needs to be agreed at EU level.

Damien Morris, Head of Policy at Sandbag says: “This is a welcome and timely intervention from the British government. A wide range of stakeholders share the government’s view that the Commission’s proposal to fix the EU carbon market is not, by itself, sufficient to put the scheme on track to cost-effectively achieve Europe’s long-term climate goals. An increase in environmental ambition is also urgently needed, and cancellation is the obvious way to achieve this. The UK position should embolden others to stand up and be counted in the months ahead.”

Notes Sandbag is a London-based climate change NGO and thinktank campaigning for an effective carbon market. www.sandbag.org.uk

[1] The Commission’s legislative proposal is published online here: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014PC0020&from=EN

[2] See page 5 of The UK government position is published online here: https://www.gov.uk/government/publications/uk-vision-for-phase-iv-of-the-eu-ets

[3] See advice from the UK Climate Change Commitee here: http://www.theccc.org.uk/wp-content/uploads/2014/04/20140414-CCC-advice.pdf

[4] In the public consultation on structural reform of the EU ETS which closed on 28 February 2013, numerous stakeholders expressly called for large volumes of allowances to be cancelled from the scheme. http://ec.europa.eu/clima/consultations/articles/0017_en.htm

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