EU – Closing ETS loopholes

European regulators are concerned that EU governments may soften the blow of emissions trading on certain energy and manufacturing companies by allocating them pollution permits from a planned reserve for new market entrants. At least nine out of 11 emission rights plans submitted are including a reserve for potential new entrants, including Austria, Denmark, Finland, Germany, Ireland, Luxembourg, The Netherlands, Sweden and the UK. Europe’s two largest polluters, Germany and the UK, have allocated 1.8 and 7.7 per cent of credits respectively to a reserve.

Catherine Day, head of the European Commission’s environment department told a Brussels climate-change conference: “ We believe this would create uncertainty and instability in the market.” Moreover, she also expressed the need to “look at is what would happen to the reserve if the new entrants don’t materialise. Governments might try to use it as a safety valve from some companies.”

According to Day, the commission will be ready to see the scheme kick off in January. The commission has now three months to approve or reject national plans in addition to the industry requiring six months to prepare for the trading of emissions credits.