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MEP Liese proposes stronger carbon price control

(Montel) The EU’s carbon market would have a stronger price control mechanism and annual reviews by the EU’s financial watchdog under proposals from the MEP leading the European Parliament’s debate on EU ETS reforms.

“Citizens and the economy are so far being insufficiently protected against price shocks,” said the German centre-right MEP Peter Liese late on Wednesday after proposing his changes to the ETS directive. 

“Any intervention, however, should avoid price shocks or sudden volatility and ensure the proper functioning of the EUA markets,” he said.

Liese proposed strengthening the existing price control mechanism set out in Article 29a so that 100m ETS allowances would be released automatically from the market stability reserve for auctioning when certain price conditions were met. 

These conditions were that for more than six consecutive months the average EUA price is more than twice the average over the previous two years. 

The 100m allowances would be released over six months. 

If the price conditions were still met at the end of that six months, the European Commission would have to convene a committee of national government experts to assess the situation. 

If this committee found that prices were not linked to market fundamentals, Liese proposed that national governments be allowed either to bring forward planned EUA auctions or to auction up to 25% of the remaining EUAs in the new entrants’ reserve. 

Tackling speculation

Liese also proposed that the European Securities and Markets Authority (Esma) report every year on carbon trading behaviour and make recommendations if needed to improve transparency and tackle speculative trading. 

"I think it is fundamentally important not to intervene too strictly here,” he said. “However, if the price increase is driven by speculation and manipulation, politicians must act.”

The EC has asked Esma for a first full report on the carbon market by April. Esma’s initial report in November found no evidence of market abuse. 

Liese proposed that the EC should immediately propose legislation to improve the transparency of the carbon markets based on Esma’s full report. The EC could do this through financial market supervision legislation, he said.

Approvals needed

Liese’s proposed ETS reforms would have to be approved by the parliament, starting in the environment committee, and agreed with the EU Council of ministers, representing national governments, to become binding. 

The environment committee is scheduled to vote on the parliament’s negotiating position on the ETS reforms on 16 or 17 May, with a full parliament vote planned in June.

Liese said in January that if the council had agreed its own negotiating position by June, the informal talks needed to agree on a final version could start in July and finish in October.

The proposals came in the wake of surging prices for carbon certificates, with the benchmark EUA contract having recently hit a record high in excess of EUR 98/t.