Energy and Environment Ministers from nine European member states, including the UK, France and Germany,are warning that an ongoing low carbon price could lead to increased costs for business and threaten the credibility of carbon markets.

The warning comes in a Joint Statement issued this morning setting out action the Ministers want to see this year to reform the EU’s Emissions Trading System (ETS) to ensure it remains at the forefront of EU policies to combat climate change and drive low carbon investments.

Energy and Environment Ministers from nine European member states, including the UK, France and Germany, have today set out action they want to see this year to reform the EU’s Emissions Trading System (ETS) to ensure it remains at the forefront of EU policies to combat climate change and drive low carbon investments.

The joint statement, which sets out a clear direction and deadlines on next steps on EU ETS reform, is calling for national governments in the Council and MEPs in the Parliament to come to a resolution to backloading proposals by July this year at the latest.

The Ministers want the European Commission to produce a legislative proposal to deliver proper structural reform to the EU ETS by the end of this year at the latest.

They are also seeking further clarification on the key arguments and myths over the potential costs and risks of the backloading proposal that were communicated to MEPs in the run up to the European Parliament’s vote in April.

The joint statement coincides with the next set of discussions today (Tuesday 7th May) among MEPs leading on backloading in the Parliament’s Environment (ENVI) Committee, ahead of discussions later this month between national governments on backloading and the European Commission considering options for structural reform of the EU ETS.

Commenting in the Joint Statement, the Ministers said:

“We are firmly committed to the EU Emissions Trading System (ETS) as being at the heart of the EU’s climate change and low carbon investment policies up to and well beyond 2020.

“However, we remain deeply concerned that the ETS as currently designed cannot provide the price signals needed to stimulate the low carbon investment needed now because the supply of allowances substantially outstrips demand, leading to a very low carbon price. This also threatens the credibility of carbon markets as the most flexible, cost-effective way to achieve emissions reductions.

“Given that the majority of EU Member States have to stimulate low carbon investments in order to meet domestic targets, an additional result of a sustained low carbon price could be a shift to a regulation-centric approach over market-based instruments, which would lead to increased costs for businesses operating within Europe.”