EU ambassadors approve post-2020 CO2 market reform deal

London (Platts)--22 Nov 2017 810 am EST/1310 GMT

Representatives from EU member states on Wednesday approved proposed changes to the EU Emissions Trading System, following an informal agreement reached November 8 between the EU Parliament and Council.

  • EU Council endorses informal deal on carbon market
  • Approved elements in line with market expectations

"The ETS reform will help the EU to deliver on its target of cutting greenhouse gas emissions by at least 40% by 2030, as agreed under the 2030 climate and energy framework and the Paris Agreement," the EU Council said in a statement Wednesday.

Related video: Post-2020 EU carbon market legislation clears major hurdle

The approval by EU ambassadors means the proposed post-2020 reform legislation has moved nearer to passing into law.

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The council confirmed elements of the reforms that were agreed informally between the council and parliament on November 8.

The measures include:

- Linear Reduction Factor: the cap on the total volume of regulated emissions will be reduced by 2.2% per year from 2021-2030.

- Market Stability Reserve: the feed-in rate for withdrawal of allowances from the market will be doubled to 24% of the cumulative surplus per year from 2019-2023.

- Cancellation of surplus allowances: the validity of allowances in the MSR above a certain threshold will be limited in 2023.

- Review: the provisions of the EU ETS Directive will be kept under review, including carbon leakage rules, the Linear Reduction Factor and the need for additional policies relating to regular stocktakes under the Paris Agreement.

- Shift to free allocation: The volume of allowances to be auctioned will remain 57% of the total cap, but with a conditional lowering of the auction share by 3% if a cut to free allocation is triggered.

The two institutions of the EU's co-legislature have now agreed the post-2020 reforms and the next steps involve formal adoption.

The EU Parliament's environment committee is expected to vote on the legislation on November 28.

The agreement would then undergo a full parliament plenary vote at a later date, before final adoption by the EU Council.

--Frank Watson,
--Edited by Jonathan Fox,

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