Greens call for clarity on ETS allowance cancellations during German coal exit

The Greens group in the German parliament (Bundestag) has called on the government to clarify how it aims to decide the amount of EU Emissions Trading System (EU ETS) allowances it plans to take off the market during the coal exit. “How much CO₂ is saved in the end depends on this. The federal government must provide clarity in good time,” said climate spokesperson Lisa Badum in a message on Twitter. In a reply to a parliamentary inquiry by the Greens seen by the Clean Energy Wire, the economy ministry said it was “not possible to quantify in advance the amount of allowances that will become available every year as a result of the coal phase-out.” It also said the government’s decision whether and what quantity of allowances is to be deleted depends on two independent reports published annually. It is “not trivial” to determine how many of the freed-up allowances would already be cancelled through the EU-wide Market Stability Reserve (MSR) and the two-report approach is “robust,” said state secretary in the environment ministry Jochen Flasbarth in a message on Twitter. In its reply, the economy ministry said the government will decide whether to publish reports “in due course.”

As Germany phases out coal, the demand for emission allowances in the EU ETS will fall. To avoid that emissions reduced under the German coal exit move elsewhere in Europe due to freed-up allowances, the government plans to cancel an amount corresponding to the additional emissions reductions caused by the shutdown of coal power capacities “insofar as it is not withdrawn from the market through the MSR.”

The economy ministry also said it was in close contact with the European Commission about plans to reform the EU ETS. While it was not clear yet whether a debate would start during Germany’s EU Council presidency in the second half of 2020, the ministry says that once the Commission comes out with a proposal – envisioned for 2021 – “the federal government will advocate for the introduction of a moderate floor price.” Without providing details on the price level, the ministry says it should “create planning security for climate investments in the ETS sectors.”