BRUSSELS, April 7. (Reuters). The European Union must tackle key parts of its carbon market reforms with caution, or it risks undermining the credibility of the scheme, a former senior European Commission official said Wednesday.
EU carbon prices hit an all-time high this week, surpassing € 44 ($ 52) per tonne CO2, and are up more than 40% since EU leaders agreed in December on a tougher emission reduction target.
Analysts expect further price increases, with Brussels proposing a carbon market overhaul in June to accelerate emissions reductions this decade.
Jos Delbeke, a former senior EU climate policymaker who has led the development of the carbon market, said on Wednesday that the Commission must resist radical changes to a key part of the scheme: its Market Stability Reserve (MSR).
“I would say don’t spoil the game. Because if you get too radical in your review of the market stability reserve, you can kill the confidence the market is showing today, ”he said at an online event hosted by the School of Florence. Regulations.
The MSR is designed to avoid the accumulation of excess permits in the market, which could lower the price of carbon emissions in the EU. With over 833 million spare permits on the market, MSR removes 24% of them every year.
It will remove 12% annually from 2024.
Delbeck said the EU should consider keeping the MSR removal rate at 24%, but that lowering the permitting threshold of 833 million could pose problems for companies seeking permits to hedge their future carbon footprint.
The EU carbon market limits the number of permits in the system and lowers this cap every year to keep the emissions covered by the scheme going down. The Commission said a key part of the upcoming reforms will be to lower the ceiling more quickly to cut emissions faster.
Brussels also discussed the idea of a minimum carbon price, an idea supported by France and Germany. Delbeck said that this could put the EU on a “difficult political path” and it will be difficult for him to get support from the EU countries.
($ 1 = 0.8413 euros) (report by Keith Abnett)