Market effects of plan to cancel emission rights during coal exit unclear - media

Carbon market experts remain unsure about the impact of Germany’s plan to cancel CO2 certificates in the EU’s Emissions Trading System (ETS) to ensure the pending coal exit will have the desired climate effect, writes Ben Garside in an analysis for Carbon Pulse. “While it is widely presumed that Germany will start withholding the allowances sometime during Phase 4 (2021-2030), the report did not propose figures or a specific timeline for the cancellations, leaving ETS participants in the dark about what’s expected to be a monumental attempt at balancing the market,” Garside writes. He said the commission proposal “appeared to set a new precedent in EU nations’ willingness to forego carbon auction revenue when setting domestic climate and energy plans, in an effort to shield the ETS from more supply-side pressure”.

Following criticism that coal plant closures in Germany may just lead to higher emissions elsewhere under the ETS, the coal commission said in its exit proposal the country should use the new rules of the ETS taking effect in 2021 to delete a corresponding number of certificates.