Whether Europe can truly fix its broken emissions trading system remains to be seen, but for now, at least, it isn’t prepared to see the thing die.
Turning around a vote from April, the European Parliament this week voted 344-311 to boost the price of carbon by keeping 900 million permits off the table.
Instituted in 2005, the Emissions Trading System was intended as a key mechanism for driving down the amount of CO2 that EU countries were spewing into the atmosphere. The idea was that over time, the ceiling would gradually be lowered, in the process allowing market forces to find the best emissions-reducing mechanisms as companies traded permits to release greenhouse gases.
But then the Great Recession happened. Slow economic growth (and even retraction) since 2008 has left Europe awash in carbon allowances, with prices too low to incentivize investment in low-carbon technologies.
The plan to delay bringing more permits into the system still needs to be approved by a majority of EU countries. And there are still strong arguments to be made that – despite the modest short-term rise in carbon prices that this week’s vote brought – the system needs more fundamental reform.
Still, by passing the fix the EU parliament avoided virtually abandoning the system.
“We now have a mandate, as Parliament endorsed our proposals. We will start negotiations with EU ministers as soon as possible and seek a common solution that will allow the ETS to fulfil its purpose,” said German Social Democrat Matthias Groote, who was steering the legislation through parliament, according to an EU statement.
“Across all continents, Europe’s experience of a market-based system for reducing CO2 emissions is being considered, and seen as a credible option, as most recently in China. We shall not let the ETS be the victim of short-term concerns. Structural reform of our Emissions Trading System will follow to ensure it remains the cornerstone of EU’s climate policy.”