Germany will cancel EU ETS allowances in framework of coal exit – state sec

Excess emissions allowances resulting from Germany's coal phase-out will be cancelled from the EU's emissions trading system ETS if they are not absorbed by the mechanism's so-called market stability reserve, environment ministry state secretary Jochen Flasbarth told journalists at the UN climate summit COP25 in Madrid. "The allowances will be cancelled to avoid a waterbed effect" by which allowances would be used by companies in another EU member state and remain ineffective in terms of emissions reduction, Flasbarth said. The state secretary said he is confident that a law required for the coal exit could be adopted by Germany's government cabinet before the end of the year, likely by 18 December. "We are in the middle of very intense negotiations and we will make it," Flasbarth said, adding that the involved ministries for economy (BMWi), finance (BMF) and environment (BMU) had "basically agreed on all questions" but that an agreement with the coal companies for a phase-out schedule for lignite (brown coal) plants was still outstanding. A spokesperson told British Carbon Pulse that the government wants the EUA cancellations to begin “as soon as possible”. “It will start when the first power plant closes down ... As soon as a plant is shut down, the deleting process starts,” he said. Concerning the commissioning of Germany's newest coal plant, Datteln 4, Flasbarth said he believes that the plant will enter into operation sooner or later, even though this seemed difficult to explain to climate activists. "I think it's acceptable that Datteln 4 will go online. We've agreed on shutting down a certain amount of capacity and if Datteln enters into operation, the reduction will have to be brought by other plants." He added that while the new plant was likely to have a higher degree of utilisation than older ones, it also is less polluting and on balance could help to reduce the impact of coal-fired power production in the country.

A government-appointed commission agreed earlier this year that Germany will end coal-fired power production no later than 2038, but the so-called coal compromise has yet to be translated into law. The ETS market stability reserve stipulates that the amount of available allowances is adjusted to the number of excessive certificates on the market every year. If there is a large excess of allowances at the end of a given year, next year's volume will be reduced accordingly. Likewise, the amount can also be corrected upwards to avoid extreme price spikes.