Minister Kęstutis Trečiokas: “Lithuania is for the EU Emissions Trading System Market Stability Reserve”2015-02-10
Lithuania supports the proposal of the European Commission revised by Latvia, which is presiding over the EU Council, to establish the market stability reserve for the EU greenhouse gas emission allowances trading system. “Such reserve would strengthen this trading system as the prices for emission allowances would more or less depend on market impacts” says Minister of Environment Kęstutis Trečiokas.
Our country supports the EC proposal that the reserve would start operating in 2021 rather than in 2017, as proposed by some EU Member States. According to the Minister, in Lithuania, the current prices for fuel and electricity are among the highest in the Community, the industry still uses outdated industrial technologies on a wide scale; therefore, it cannot meet the pollution indicators which serve as the basis for estimating the quantities of emission allowances allocated to economic entities free of charge. In order for the industry to be able to accumulate investments and modernise production, it is important that we avoid a sudden rise in the price of emission allowances, as Minister Kęstutis Trečiokas stated.
The market stability reserve would help resolve the current ETS problems. As a result of the economic crisis and reduced market demand, there is a surplus of more than two billions of emission allowances. Therefore, the prices of emission allowances are too low and the incentives for economic entities to invest in measures aimed at reducing greenhouse gas emissions have weakened. Based on the calculations carried out by the European Commission and EU Member States, the EU ETS is inefficient. It must be improved because the expenses related to the fight against climate change will inevitably increase as the EU seeks to implement much stricter goals to reduce greenhouse gas emissions.
After the aforementioned reserve has been established, the amount of emission allowances scheduled for sale by auction pro rata to the surplus of emission allowances freely available on the market, would be transferred to it every year. In case the amount of emission allowances freely available on the market is insufficient, the respective quantity of such allowances could be taken from the accumulated reserve and added to the quantity allocated for auctions. This would help maintain a more stable number of emission allowances on the market and reduce future price fluctuations.
The proposal by the European Commission to establish the EU emissions trading system market stability reserve is available HERE.
Public Information Division
10 February 2015