Robert Jeszke and Sebastian Lizak for EURACTIVE: “Is anyone able to control the carbon price?”

Robert Jeszke and Sebastian Lizak for EURACTIVE: “Is anyone able to control the carbon price?”

Robert Jeszke and Sebastian Lizak for EURACTIVE: “Is anyone able to control the carbon price?”

On June 4, 2021, Euractiv published an article entitled “Is anyone able to control the carbon price?” by Robert Jeszke and Sebastian Lizak concerning EUA prices on the EU ETS that are currently rising too high and too fast, making the market extremely volatile, and it seems the European Commission has no effective stabilising tool to tackle this. 

There is no doubt that EUA prices are currently rising too high and too fast, making the EU ETS market extremely volatile. On one hand, this is unfavourable for EU ETS compliance entities, but on the other hand, it greatly benefits speculators, for whom extreme volatility means more money. The question is whether we really want to feed the speculators volatile EUA prices or whether we should instead strive to stabilise them. Participants in EU ETS compliance should receive some type of guarantee that when an extreme situation occurs in the market the EC has a transparent mechanism that can be triggered. Such a ‘safety valve’ would be indispensable for stabilising EU ETS participants, contributing to better planning of future investments. It seems that the European Commission currently has no such effective tools for stabilising prices. The mechanism in Art. 29a of the EU ETS Directive – which allows for 100 million allowances to be released from the Market Stability Reserve and auctioned in case of a sudden increase in EUA prices – cannot be called such a tool. It is practically impossible to trigger, given the current structure and problems with interpreting the provision. The next Market Stability Reserve review could be a great opportunity to introduce a price stabilising mechanism. One of the elements that should be considered is the possibility of opting out of EUA cancellation in the Market Stability Reserve after 2023 (an ‘invalidation mechanism’). These allowances may become valuable assets in the future when the market situation changes drastically and intervention is required. Lowering participants’ confidence through a lack of price stabilisation and predictability in the context of planning future investments is the last issue the European Commission wants to face just before the discussion on the ‘Fit for 55 Package’ planned for July.

The whole article is available here:  “Is anyone able to control the carbon price?” (Euractiv)