EU’s Liese Has Carbon Price Rule in Crosshairs as Costs Soar

EUs Liese Has Carbon Price Rule in Crosshairs as Costs Soar -ENB
lva steel plant in southern Italy.Photographer: ALFONSO DI VINCENZO/AFP
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A key lawmaker in the European Union is seeking tougher rules to prevent prices from rising too quickly in the bloc’s carbon market at time when companies are grappling with record costs to pollute.

Peter Liese, who is guiding reform of the EU Emissions Trading System through the European Parliament, said that next week he plans to propose an amendment to existing provisions to limit excessive price growth in the bloc’s cap-and-trade program. Benchmark carbon prices fell as much as 3.8% following his remarks.

Emissions permits in the EU have soared by about 150% in value within the last year and have been trading near 100 euros ($114.35) per metric ton. Energy-intensive industries — typically big polluters — have voiced concerns that the price surge is harming competitiveness, and some member states have called for action.

Prices for EU permits have surged amid continent's energy crisis

Liese, a German Christian Democrat, said the price of emissions is driven mainly by ambitious climate policies in the European Green Deal and an unprecedented energy crisis, which has caused natural gas prices to skyrocket amid a supply crunch. He said the existing mechanism that allows the EU to act in the event of price spikes needs improvement after “quite dramatic” recent gains failed to trigger it.

“Maybe we need to sharpen it to provide more predictability against price shocks,” Liese told reporters during a briefing. “It’s important to start a debate, to find a good solution and then to implement it.”

Key Tool

The emissions trading system is the bloc’s key tool for meeting a tougher climate goal for 2030 and, eventually, the Green Deal target of climate neutrality by 2050. Started in 2005, the ETS imposes shrinking caps on emissions from almost 12,000 installations owned by manufacturers, power producers and airlines. Most permits are sold at government auctions and a share is given to some emitters for free.

Carbon contracts for delivery in December traded 3.4% lower at 93.60 euros per metric ton by 4:16 p.m. Brussels time, after falling to as low as 93.26 euros earlier.

The European Commission, which oversees the functioning of the market, has no central bank-like tools to intervene, and it sticks to its policy of not commenting on prices. The current provision to prevent excessive price growth, including in Article 29a of the emissions trading law, is ambiguous and has never been used. The Commission has consistently declined to comment on how exactly it calculates the potential triggers.