EU plans to sell more permits could “destroy” vital CO2 trade, RWE and green think tank warn

The European Commission’s plans to use the sale of CO2 permits as a source of additional income is a risk to the EU’s entire climate architecture and emission reduction targets, utility RWE and the Institute for Applied Ecology (Öko-Institut) have warned. “Additional emission rights will increase emissions and can set in motion a vicious circle” whereby a larger supply leads to lower prices, resulting in the necessity to sell even more permits to generate the targeted 20 billion euros, write RWE CEO Markus Krebber and Öko-Institute climate economist Felix Matthes in an op-ed for business daily Handelsblatt entitled “The EU Commission wants to plunder emissions trading.”

“The consequences will be dramatic: there will no longer be a reliable path of emission reductions, the prices for pollution rights will fall and with them the incentives to switch to green technologies. The green transformation will be slowed down,” Krebber and Matthes argue, adding the EU Commission’s plans “destroy a central instrument because there is no agreement on alternative financing mechanisms.”

The European Commission last week proposed to raise 20 billion euros by selling surplus CO2 emission certificates from the the Market Stability Reserve under the EU ETS (Emissions Trading System) to help financing the exit from Russian energy imports, in its RepowerEU plan. EU member states will discuss the proposal at a special European Council meeting on 30-31 May. The European Commission said reaching the plan’s objectives would require additional investments of 210 billion euros by 2027. German industry and policymakers last week reacted largely positive to the EU plans.