Fortum, Statkraft and Vattenfall have proposed improvements of the EU carbon market to better reflect the high ambitions of the Paris Agreement.
In their joint position signed by the CEOs of the companies, they call for three immediate actions to be incorporated in the ongoing revision of the EU ETS (emissions trading system) Directive for Phase 4.
The Paris Agreement established an international long-term political framework for the global transition towards low-carbon economies. The EU carbon market (ETS) was established as the EU’s main climate policy instrument. However, the carbon market does currently not reflect the long term ambition of the Paris agreement. Moreover, the ETS does not provide sufficient incentives for low carbon investments in the energy sector, the companies said.
It is important that the EU climate policy is adjusted to better reflect the intention of the Paris Agreement. Therefore, the EU carbon market must be strengthened now as the EU’s core instrument. To this end, the three Nordic utilities propose three immediate actions:
- To raise the ambition of the ETS-scheme by increasing the linear reduction factor (LRF) of the ETS to at least 2.6% from 2021.
- To reduce the supply of ETS allowances according to the impact of national overlapping policies.
- Not to sell allowances from the Innovation Fund before 2023 in order to minimize market distortion.
Fortum, Statkraft and Vattenfall said they are strongly committed to making EU power generation CO2-neutral by 2050 at the latest. The earlier the EU ETS is adjusted to reflect the long term EU climate goals, the lower the overall societal costs for reaching the long-term climate target will be, and the more predictability the EU ETS operators and investors will have, the three companies concluded.
The three companies are active in the European renewable energy sector, with Vattenfall and Statkraft involved in the offshore wind industry, among others, and Fortum having a stake in a wave energy company.