Call to strengthen the EU carbon market

The European Commission presented in July 2015 a legislative proposal to revise the EU Emissions Trading System (ETS) for the period after 2020. As the current oversupply of allowances has brought the carbon market out of balance, resulting in low carbon prices, many stakeholders, including Statkraft, argue that the proposed revision is not sufficient to strengthen the ETS as the EU's core instrument for emission reductions.

During the fall of 2016, the relevant committees in the European Parliament have voted on the Commission's proposal. Statkraft has actively contributed – alone and in coalition with other companies – in providing specific text in this phase. Now, the process is in a final stage in Parliament, and the proposal is up for vote in the Plenary. We have proposed and supported throughout the process several amendments which are important for strengthening the ETS. Now, our coalition has sent a new "Electricity Sector Wake Up Call", where we ask MEPs to endorse the following:

• Double the outtake rate of the Market Stability Reserve (MSR) to 24% from 2019 to address the near term supply problem
• Increase the Linear Reduction Factor (LRF) to at least 2.4% to better align with the EU's long term objective for 2050
• Take into account interaction of the EU ETS with other Union and national climate and energy policies that impact the ETS balance
• Allow voluntary cancellation of allowances by Member States
• Cancel 800 million allowances placed in the MSR in 2021 and unallocated allowances in the future

The ETS revision will also be discussed in the Council at the end of February. Statkraft is preparing input and recommendations to be submitted to Member States. However, the final decision on the ETS Directive may still take more time as the Council needs to agree on a common position. Thereafter the Council, Parliament and Commission need to agree (in trilogue) and adopt a final text.