In Brussels on the challenges to the ETS revision

The “Tensions on the review of Europe’s Emissions Trading System” event was organised by Politico with the support of the Polish Electricity Association ( PKEE) . The meeting, attended by the European Union officials and the representatives of Brussels-based associations took place on 28th March 2022.

Paweł Cioch, Vice-President for Corporate Affairs, PGE Group and member of the PKEE Management Board pointed out in his opening speech that, since the lawmakers at the European Parliament are currently conducting heated discussions on the future shape of the EU ETS, it is indeed the perfect timing to assess the functioning of the EU ETS in the past and to discuss how the system could be improved to enable cost-efficient decarbonisation and to support all Member States in their efforts towards achieving climate objectives for 2030 and 2050. - It is also worth pointing out that ESMA has released its long-awaited report on the ETS market today. Our initial assessment shows that ESMA shares some of our concerns over the monitoring of the market and a possible negative impact of certain trading activities. We also welcome ESMA’s proposal to further consider measures like adjusting position limits in derivatives on emission allowances – he added.

According to PKEE’s Vice-President Cioch, the monitoring and oversight of the market must be significantly improved to ensure the scrutiny of allowance and derivative trading. - The activities of the financial actors should not deprive the compliance entities of the allowances and/or funds to meet their climate goals. The role of those actors and their impact on the market should be limited - he said. - We also face the more general - but equally important - challenge of the need to stabilise the ETS market - he said. - Measures like price cap/floor or volume-based mechanism - MSR - could be used for this purpose - he added.

Mr Cioch noted that another solution to protect the ETS market from speculators is to restrict their access to the market and leave it open to entities that surrender allowances and those who facilitate the transactions on behalf of compliance institutions. - These amendments were recently proposed by several MEPs in ITRE and ENVI committees and, in our opinion, are definitely steps in the right direction to protect the market against price rallies and, in consequence, protect the consumers and industries – he stressed.

In conclusion of his speech, Mr Cioch emphasised that the Modernisation Fund should be increased further than the Commission’s proposal of 2.5%. - I would like to invite the European lawmakers at the European Parliament to increase the Fund proportionally and adequately to cover the challenges that the beneficiary countries have to face in their decarbonization journey. These resources should be exclusively dedicated to the energy transition and investments in large-scale renewable energy sources: PV, offshore and onshore wind, as well as energy storage facilities and cogeneration plants that move away from coal-fired generation – he pointed out.

European Commission on the review of the Emissions Trading Scheme

Brussels is considering introducing position limits in carbon derivatives as recommended by the European Securities and Markets Authority (ESMA), said Mauro Petriccione, director general of the European Commission’s climate action department. – For a while now, the Commission has been looking into options which would set an ownership cap that would limit the number of shares that one trader may own to prevent market abuse, but has not come to a conclusion yet - stressed Petriccione. - This means position limits are on the table – he added.