Does the corona pandemic require changing the EU ETS?

3 minutes read

Does the corona pandemic require changing the EU ETS?

The corona pandemic leads to unprecedented circumstances in nearly every aspect of life, with climate policy being no exception. In the EU ETS we have seen prices collapse, on the one hand because of low economic activity and low energy demand, on the other hand as a result of increased selling activity. Various stakeholders have argued for market intervention, including calls to strengthen prices and requests for a temporary suspension as companies need their cash elsewhere.

As a result of the corona pandemic greenhouse gas emissions are rapidly declining everywhere and unexpectedly the targets agreed for 2020 could be reached in most European countries. The EU ETS is designed as a tool to help achieving these targets in a cost-effective manner. It has no function in adapting targets nor in ensuring specific price levels. The EU ETS is a market instrument that is responding to market circumstances. When demand is low, prices drop. When companies wish to sell their allowances to cash in they are entitled to do so. In 2018 a market stability mechanism was formulated to dampen effects of overcapacity or shortage but this mechanism operates within set limits and was not formulated to achieve reductions by itself. In short: the market instrument is functioning as planned, even in circumstances that no one would have foreseen.

What is needed is increased flexibility in reporting requirements and in the deadlines for compliance and data submission for next year’s allocation. Also to ensure that in these hectic times all market participants are properly informed. Our suggestions, in line with the spirit of current regulation:

  • Require companies to respect the deadline for submitting emission reports but allow for sending qualified but verified reports in case their verifier could not conduct a site inspection during verification.
  • Extend the period for compliance, providing flexibility to cash-constrained companies to purchase and surrender their allowances at a later stage.
  • Allow for qualified but verified production data in case verifiers could not conduct a site visit while verifying activity level data as the basis for next year’s allocation.
  • Develop a harmonised approach across the EU to conduct corrections of emission and production data once verifiers have completed site visits and inspections have been conducted.
  • Actively inform all EU ETS operators on the price developments, the causes and impacts as well as on actions taken (and actions not taken) to ensure a level playing field in information.

Low EUA prices obviously do not provide sufficient incentive to invest in clean technologies or invest in energy efficiency. And the corona pandemic will most likely impact the timeframe for implementing the EU Green Deal and the Climate Law. But that’s food for thought for other blogs.


Monique Voogt


Update 26 March 2020: the European Commission issued a notification on timely submission of verified emission reports and surrendering of allowances. More info is available here.

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