The European Parliament on 16 April rejected the European Commission’s proposal for backloading carbon trading certificates and directed it back to the Parliament’s Environment Committee for further discussion.

The European Commission had proposed to amend the ETS in a way that would have given it the right to withhold allowances. This would be a precondition for the Commission’s actual backloading plan, the aim of which is to withdraw 900M emissions allowances and in a second step cancel them, thus artificially raising the price for allowances. Eurofer has always been critical of the backloading proposal, pointing out that it would add to the cost burden and weaken international competitiveness of the European steel industry.

The European Steel Association (Eurofer) welcomes the decision and points out that an adoption would have been a further blow to the credibility of the EU Emissions Trading Scheme (ETS). “It is clear now that the Commission should not intervene in a functioning market. The market mechanism of the ETS is the only part of European climate policies that actually works,” Eurofer Director General Gordon Moffat said. “The fundamental flaw of the system is that high carbon prices result in the deindustrialization of Europe in the long term. There are no technologies allowing industry to meet the target of 80 to 95% in the Commission Roadmap for 2050”, he continued.

Eurofer has also pointed out in the past that the ETS is functioning as intended. It was invented as a market based system to reduce carbon emissions. As such, it is only natural that the price for carbon allowances reflects the current economic crisis with decreasing production over a broad spectrum of energy-intensive and manufacturing industries. The fact that Europe will indeed meet its 2020 emission reduction targets of 21% compared to 2005 levels is further proof that the ETS-market is functioning as intended. A higher carbon price simply makes this effort more expensive and more difficult.