Strengthening emissions trading
The position paper of the German Environment Agency provides concrete recommendations on the structural reform of the European Emissions Trading System (EU ETS) to strengthen its impact for climate protection and improve its compatibility with interacting energy and climate policies. The EU ETS is currently unable to satisfactorily fulfil its role as the leading climate policy instrument: market surpluses have already put pressure on the price for emission allowances for a long time and have weakened its incentive effects. The caps are structurally too high and not adequately coordinated with other interacting energy and climate instruments. Given the weak price signal from the EU ETS, an increasing number of Member States of the European Union are planning to introduce additional national climate or energy policy instruments or have already done so to achieve their national emission reduction targets. The reform measures taken so far – back-loading and market stability reserves – are still insufficient. The German Environment Agency (DEHSt) therefore recommends immediate further steps to strengthen emissions trading.
Surplus certificates and further development of the Market Stability Reserve
In May 2015, the European Parliament and the Council agreed to introduce a market stability reserve (MSR) as of 01.01.2019. This is a rule-based mechanism designed to reduce high structural surpluses and stabilise the EU ETS in phases of fluctuating demand. A discussion paper by the German Emissions Trading Authority (DEHSt) recommends an early review of the MSR parameters and examines various options for its design. A study commissioned by UBA also proposes criteria to adjust the cap in the event of a strong and lasting change in the general framework.
Emissions trading in the context of European climate protection targets
Text: The price of emission allowances is currently at a very low level in the EU Emission Trading System (EU ETS). The objective of emissions trading to set incentives for low-emission production methods is currently largely undermined, and its role as a lead instrument of European climate policy is also under threat. This discussion paper is aimed at political decision makers and the interested public. It contains recommendations as to which measures are generally suitable (and which are not) in order to strengthen the EU ETS and to guide it to the medium- and long-term climate target path.
Relation of emissions trading to national energy and climate policy
Emissions trading is not only a key instrument for achieving European climate protection targets. If allowance prices are high enough, it can make a significant contribution to the accomplishment of national climate protection targets. However, additional climate protection measures are needed to achieve the targets set in Germany, as in a number of other Member States. Potential interactions with emissions trading must then be considered.
Following the introduction of the European Emissions Trading System (EU ETS) in 2005, further national and regional emissions trading systems have emerged worldwide. The connection of these systems by so-called linking can gradually lead to a global carbon market. Such a market would be a cost-effective solution to reduce greenhouse gas emissions and strengthen climate protection.
Since 2015, the German Emissions Trading Authority has been co-operating with the Alexander von Humboldt Foundation within the framework of the International Climate Protection Fellowship for young climate experts from non-European transition and developing countries. DEHSt as an academic host supports the climate experts in their research. As a product of this co-operation, the following research reports have been produced.