The European Parliament resolution of 14 March 2013 on backloading – on the verge of legal order?
Tuesday, 19 March 2013 07:23

 

Given the slight majority of votes, the preliminary character of the debate and legal challenges for the overall context of the problem, any optimism when it comes to the conclusions contained in point 91 of the resolution appears premature.

 

 

The European Parliament upheld on 14 March 2013 by a slight majority a non-binding recommendation for regulators to intervene in the balance of the supply and demand set by the current rules of the EU ETS.

 

It was done, however, only by reference in point 91 of the European Parliament resolution of 14 March 2013 on the Energy roadmap 2050, a future with energy (2012/2103(INI)), thus the said vote represents only the preliminary test before the main European legislature decision on the issue, scheduled for April 16 (namely, the backloading amendment of the EU ETS Directive allowing for the relevant changes in auction time profile set by the Auctioning Regulation).

 

Besides the eventual outcome of the apparent backloading dispute (the European Parliament resolution of 14 March 2013 was adopted by a margin of only three votes) the said issue is a classical example of extremely lengthy EU legislative procedures, considering the dates on which the relevant propositions were formulated (see: The Draft Report of 28 October 2011 on a Roadmap for moving to a competitive low carbon economy in 2050 – the potential breakthrough in European climate policies?).

 

When it comes to the exact formulations, in point 91 of the resolution of 14 March 2013 on the Energy roadmap 2050, a future with energy (2012/2103(INI)) European Parliament :

 

"Recognises that the ETS is experiencing problems not originally anticipated, and that the accumulating surplus of allowances will depress the incentive to promote low carbon investments for many years to come; notes that this endangers the effectiveness of the ETS as the EU's principal mechanism to reduce emissions in a manner that creates a level playing field for competing technologies, that gives companies flexibility to develop their own mitigation strategy, and that provides for specific measures to combat carbon leakage; calls on the Commission to adopt measures to correct the failings of the ETS and to allow it to function as originally envisaged: suggests that these measures include:


(a)

presenting as soon as possible a report to Parliament and the Council which shall examine, amongst other aspects, the impacts on incentives for investments in low-carbon technologies and the risk of carbon leakage; before the start of the third phase, the Commission should, if appropriate, amend the regulation referred to in article 10(4) of Directive 2003/87/EC in order to implement appropriate measures which may include withholding the necessary amount of allowances;


(b)

proposing legislation at the earliest appropriate date to modify the 1,74 % annual linear reduction requirement so as to meet the requirements of the 2050 CO2 reduction target;


(c)

undertaking and publishing an assessment of the value of establishing a reserve price for the auction of allowances;


(d)

taking steps to increase the input of relevant information and the transparency of the ETS registry, so as to enable more effective monitoring and evaluation..."

 

The said stance rises, in essence, the following doubts:

 

Modification of the 1,74 % annual linear reduction factor indeed would be a fundamental intrusion in the underlying principles of EU ETS scheme in its third phase, where the said value for the reduction factor had been adopted in 2008 with the perspective of setting stable and predictable regulatory environment till 2020.

 

The above comment equally applies to the proposition to establish a reserve price for the auction of allowances. This is without prejudice to the consideration that the reserve price for the auction of allowances is, generally, nothing unusual (see Reserve Price Bid Limitations for California Auctions).

 

However, such requirements and rules should be made known with the appropriate vacatio legis i.e. before and not in the running phase of the scheme. There are many references in the EU ETS legislative instruments which recall the weight which the legislators attached to legal predictability of the emission trading system in its 2020 perspective.

 

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