Poland's dep. climate min. announces delay of ETS2 about to transform into law
The delay of second edition of EU Emissions Trading System (EU-ETS2) will soon become law; talks between Member States and the European Parliament on this matter may be concluded as early as December, Poland's deputy climate minister Krzysztof Bolesta told PAP Biznes. He added that the mechanism for controlling permit prices proposed by the European Commission on Thursday will only come into effect once the delayed ETS2 is launched.
On Thursday, the EC proposed changes to the CO2 emissions allowances' Market Stability Reserve (MSR) to ensure a smoother launch of the new ETS2 system for emissions from road transport and buildings. These changes are intended, among other things, to increase the possibilities for stabilising permit prices in this market when they exceed EUR 45 per tonne of CO2.
When asked by PAP Biznes whether Thursday's EC proposal was in line with the November EU Environment Council's conclusions on the ETS2 delay and additional safeguards against price increases for allowances on the ETS2 market, Bolesta answered affirmatively.
"The ETS2 delay is about to become law. We are in the process of finalising talks between the Member States and the European Parliament. I think these talks will be concluded in December. What the Commission has now put on the table is a price control mechanism that will apply to the delayed ETS2," Poland's deputy minister of climate and environment explained.
"The package of solutions proposed by the Commission today is aimed at keeping ETS2 costs in check. But as I said, it will only work once the system is up and running," he added.
In Thursday's package of changes to the MSR, the EC also proposed allowing Member States to launch ETS2 auctions earlier, which would enable them to generate an early price signal and obtain revenues for early investments as early as 2027.
"In this context, early auctions are also postponed by one year," Bolesta explained.
"I don't know if and in what form we will agree on this new Commission proposal, but early auctions are there to see how the market values emission allowances before the settlement obligation comes into force. In simple terms, it's a market test," he added.
Deputy minister Bolesta confirmed that only these EU countries who wish to participate will join the early ETS2 auctions.
"If someone wants to check where the market is, they will order them. This is part of the package at the request of Belgium," he added.
The Market Stability Reserve (MSR) is one of the most important tools for regulating the supply of allowances on the CO2 emissions allowance market (EU ETS). It aims to restore the balance between supply and demand and increase the market's resilience to price shocks by adjusting the number of allowances sold at auction.
At the beginning of November, Poland's Ministry of Climate and Environment (MKiS) announced that Poland and other opponents of the ETS2 system had managed to agree on a one-year delay in its entry into force at the EU Environment Council. At the same time, EU environment ministers agreed to set a climate target for 2040.
ETS2 was to cover emissions from fossil fuels used in road transport and for heating buildings in 2027.
After the meeting, Poland's climate minister Paulina Hennig-Kloska announced that the European Commission is to present a revision of the ETS2 directive by the end of the year with proposals for profound changes, which will then be negotiated with the participation of EU countries and the European Parliament.
She pointed out that the main objective of the ETS2 revision negotiations for Poland is to minimise the impact of this directive on household living costs. Among these goals, she also mentioned a delay of more than one year for ETS2 as a result of further negotiations in the EU.
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