Ahead of a meeting of EU ministers tomorrow to discuss the future of the European Union’s Emissions Trading Scheme (ETS), the Institutional Investors Group on Climate Change (IIGCC), whose members represent EUR7.5trillion in assets under management, urges ministers to consider changes which would ensure the continued viability of the ETS.
The IIGCC makes three recommendations EU ministers should consider to support an improved Emissions Trading Scheme:
• A change in the overall level of ambition of the EU’s 2020 emissions target, with a commensurate change in the EU ETS carbon credit allocations
• An immediate action to define and implement, as soon as possible, a one off set-aside of carbon credits in order to remove oversupply from the system
• Pre-agreed review processes to cope with unforeseen economic circumstances in future
Stephanie Pfeifer, Executive Director of the IIGCC, said: “The European Union’s Emissions Trading Scheme is not producing the outcomes originally envisaged and needs fixing.
"The EU ETS was expected to support emission reductions by catalysing innovation and driving investment in low carbon solutions. This is not happening. Carbon credit prices have fallen dramatically as a result of oversupply in the system. At under seven euros per tonne, the carbon price is not even high enough to support a switch from coal to gas.
"As long-term investors, IIGCC members are concerned that current exceptionally low carbon prices fail to create strong enough conditions for private investors to allocate capital to low-carbon energy sources. With the potential for climate change to have major negative impacts on the economic systems in which they operate and on the assets in which they invest, investors are calling for decisive action
"When EU Ministers sit down to discuss the future of the carbon market at a meeting tomorrow we urge them to show leadership and implement measures which boost the carbon price and help stimulate private investment in low carbon solutions.”