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IETA position on the state of the EU ETS |
• IETA members strongly support the EU ETS and believe that the market responds as intended: it delivers emission reductions at lowest costs to society and adjusts to economic conditions.
• However, fragmented EU and national policies are undermining the EU ETS price signal and the current extraordinary economic situation is amplifying this effect. This has led to the false impression of many stakeholders that the EU ETS is failing.
• IETA is concerned that market participants are losing confidence in policy makers’ commitment to enforce long-term emission reduction targets and that the EU ETS is at risks of being side-lined as a policy instrument.
• IETA considers that to rebuild confidence, a system reform is needed, including (i) legislation to change the cap trajectory to align mid-way climate targets with 2050 objectives and (ii) a revision of the cap setting process to ensure the intended relationship between the cap and business-as-usual emissions continues.
• If deemed necessary to create an auction set-aside, it is essential that: (i) the banking rules are not changed; (ii) allowances are removed from future auction volumes in an objective, predictable and transparent manner while clarifying how these will be treated in the context of post-2020 EU climate targets; (iii) market participants are reassured that such interventions will not become the order of the day.
• These conditions are essential, as IETA remains wary of the consequences of ad-hoc interventions for the credibility of this scheme as a cost-effective compliance instrument.
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