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Carbon prices: a European consensus

The price of carbon is the subject of an agreement on a monitoring mechanism by the main bodies of the European Union (EU).

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The price of carbon is the subject of an agreement on a monitoring mechanism by the main bodies of the European Union (EU).

A more responsive mechanism

The agreement on carbon pricing comes as part of a series of EU reform proposals. Thus, the European Parliament, the Council and the Commission agree on a new price control mechanism. The aim is to make it more responsive to any spike in the price of carbon allowances.

The carbon price control mechanism is part of the EU Emissions Trading Scheme (ETS). Article 29a of the EU ETS provides for an increase in supply if the carbon price is three times the average. The average is calculated over the previous two years for six months or more.

However, the mechanism remained inactive as its activation remains at the discretion of the Commission. From now on, the activation of the mechanism will be automatic. If the threshold is exceeded, the mechanism will trigger the automatic issuance of 75 million additional allowances.

Stricter funding

EU bodies decide to harden their position on international climate finance. Some Member States are not using the ETS revenues to comply with their climate obligation. The EU will therefore hold member states accountable for meeting these targets.

In addition to the price of carbon, the European institutions addressed the issues of carbon capture and use. These technologies can be mobilized to meet the objectives of the Union’s climate policy. In addition, Brussels has set a commitment for Member States to mobilize at least $100 billion per year, as soon as possible.

However, some reform proposals are not successful. These include the ambition to create a new autonomous carbon market for buildings and transport. Indeed, further discussions will be required to move forward on these issues.

 

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