Rud Pedersen Climate Talks Webinar : Peter Vis in conversation with Jos Delbeke

26 Mar 2020

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.@RudPedersen_EU Climate Talks: Peter Vis in conversation with Jos Delbeke @vispete @delbeke_jos @EUClimateAction @eu_commission started.

Question on whether regulators should intervene to avoid lower EU ETS prices

@delbeke_jos “It will not go below 10 EUR, because of the market stability reserve. As soon decision has been made, prices jumped from 5/7 to the previous 25 euro. …

We should also keep in mind that fluctuations are normal in a market system. In the weeks to come, there will be more upheaval.”

@vispete : “ Any intervention in the market of the sort to change parameters of the MSR would require legislation (ordinary legislative procedure = long). We are heading towards a new amendment. If it reflects a higher ambition, increased stringency would have to be incorporated”

@delbeke_jos “Carbon price signal should be the same across the economy. It is a good idea to widen the scope of the ETS (to include buildings and transport). We did not do this at the beginning, because it only functions well if monitoring, reporting and validation is working”

“Now we enter new territory and prepare for change, but should not rush too fast. In that regard Germany is interesting. They had a debate on a parallel emission trading system (for transport, households and buildings), over time merging it with the EU ETS.”

Question on whether the EU ETS is there because taxation is difficult to intervene?

@vispete : “Any change in taxation for transport and buildings requires unanimous approval of all member states. That would be my first preference. …

… If that can’t happen, then it could be integrated in the EU ETS in a very careful way. Taxation is however a simpler instrument, and there are good reasons not to change the EU ETS, as it only started to work properly in the last 2 or 3 years.”

@delbeke_jos : “ There is also a provision of enhanced cooperation. If unanimity procedure is exhausted, we could go for smaller groups of member states that already start, waiting for the unanimity. There are ways to overcome this”

Question on how to overcome that richer member states compensate ETS costs of the industry. How to avoid this, including inequality concerns?

@delbeke_jos : “Member states are compensating indirect costs of ETS. ETS normally leads to a somewhat higher electricity price.”

… this is then compensated by national governments. This is not the purpose of the ETS. Revenues are spoiled by compensating the effect that ETS was meant to achieve. I hope that the next review of the ETS (market stability reserve, …) is going to address that. …

… Indirect cost compensation runs against internal market and the efficiency of the instrument. So far we did this under the Energy state aid guidelines. The practice however did not disappear.”

💡Note: for a case study on Belgian cost compensation :

@delbeke_jos : “42 % of allowances are given away for free, based on a set of benchmarks. These need to be reviewed. The commission is working on these, with good collaboration with the industry.”

💡 Note: an overview of benchmark criteria is at

@vispete : “Member states that choose to compensate (currently around 10) need to go through state aid guideline review.”

@delbeke_jos : “If you cannot remove the corrections through indirect cost compensation, we should have equal treatment for everybody in the internal market

… Now it is a bit of a hidden subsidy, ‘a la tête du client’. Member states are currently competing with eachother”

Question: Aviation industry emissions have been growing fast, and have received a lot of support. Is the addition of aviation to the EU ETS the best way to address this issue?

@delbeke_jos : “Worldwide, with CORSIA of ICAO, there is a second-best solution being designed. …

… I question however whether this will be effective, as it is weakly designed. If we can not put international flights under the ETS, we should go for a taxation on kerosine. We need to remove all tax excemptions in the aviation industry. …

… First option: tax on kerosine. Second option: bringing back international aviation under the EU ETS. When we tried this before, the EU was criticized of not respecting the extraterritorial principle. The EU Court of Justice decided that this is not extraterritorial”

@vispete : “Of course government aid is coming with strings attached. When governments will be giving aid, and at the same time imposing taxes. First of all: the aviation would like to be carbon neutral. We need to help them to achieve this”

💡Question to @vispete (hope to get an answer here) :

Which technologies do you have in mind to allow for a system-wide full decarbonisation of the aviation sector?

Question: is there an option of including the maritime sector in the EU ETS?

@delbeke_jos : “Monitoring, reporting and validation (MRV) is essential. Without knowing the technology, we don’t know whether this will be effective. …

…On the basis of the MRV, we have to decide on how to include the maritime sector in the EU ETS. The sector had plenty of time to prepare. The EU should now leverage this and include the sector in the ETS “

Question on including buildings in the EU ETS: If buildings are included, this will cause price increases for households. Is this the way to go?

@delbeke_jos : “ It would be used to bring fossil fuels in the picture. I would be pragmatic. …

… For example: the VAT rates for gas and other fossil fuels are different in some member states. In that sense, the energy taxation directive has a major task in front of it: the review must remove inconsistencies. There are many, depending on member states. …

@vispete “not in favour of bringing buildings into the EU ETS”

@delbeke_jos : “The incentive to the consumer should be rational. For example, the incentive of putting a heat pump in your house instead of continuing the classic fossil heating systems.”

Question on carbon leakage

@delbeke_jos “42 % of allowances are given away for free, based on a set of benchmarks. These need to be reviewed. The commission is working on these, with good collaboration with the industry. Let’s also look at innovation tools. …

… We can bring them in synergy, to fight distortions in competition. I would wait and see whether we are going to see much higher carbon prices, while going for tighter targets. Coal is moving quicker outside the energy system.”

💡 Question (previously posted on Twitter) to @delbeke_jos : The decrease in coal generation in the last quarter of 2019 (Germany, UK) was due to a strong decrease in the international gas price, causing gas production to be cheaper than coal. Not only ETS.

💡 (bis) … how to overcome this? Should the EU intervene in the international gas/fossil price?


@vispete : “ETS generates a lot of revenues for governments. Auctioning revenue is reserved for the EU, which is put in the innovation fund. This is now specifically designed to facilitate industrial innovation. It can’t do it alone, but the use of revenues is important”