Ahead of a crucial meeting in the European Parliament being held tomorrow, SSE has called on Members of the European Parliament (MEPs) to vote in favour of proposals designed to strengthen the ailing EU Emissions Trading Scheme (EU ETS).
SSE was one of nine energy companies, collectively known as the Coalition of Progressive European Energy Companies, to sign a letter sent to MEPs last week, urging them to support the 'backloading' measure proposed as a means of reviving the price of carbon allowances.
The EU ETS was designed to reduce carbon emissions and stimulate investment in low-carbon technologies by putting a price on carbon emissions that would go up over time. Electricity generators have to buy allowances in regular auctions to cover the amount of carbon emissions they produce.
It was intended that the scheme would constrain the amount of carbon which could be emitted, creating a scarcity of allowances and driving up prices. But Europe’s emissions fell dramatically as a result of the recession, denting demand and thereby creating a surplus which saw the price of allowances fall from highs of €30 per metric ton to lows of about €4/mt.
As a short-term solution, the European Commission proposed a ‘backloading’ measure, or holding back the auction of some allowances due in 2013-15 until 2018-2020. The idea is that this would create a (temporary) scarcity of allowances, pushing up the carbon price. The proposal – which is supported by the UK Government – is currently making its way through the European Parliamentary process having previously been approved by members of the Environment Committee.
Tomorrow, MEPs will vote on whether or not to accept the proposal in plenary. SSE urges MEPs to support the measures being put forward as an important first step.
Bas Batelaan, Head of European Affairs at SSE, said: “Although a short-term solution, the backloading proposal is an important way of providing immediate support for the EU ETS price and should be followed by more structural, longer term remedies to restore confidence among low-carbon investors. These policies should be centred around an ambitious EU post-2020 energy and climate framework, including legally binding targets for carbon reduction and renewables.”
Other members of the Coalition of Progressive European Energy Companies include Dong Energy (Denmark), Eneco (the Netherlands), EWE (Germany), Statkraft (Norway) and EDP (Portugal).