Uncertainty over the UK’s participation in the EU Emissions Trading Scheme (ETS) beyond 2019 “is causing issues in the market now”, said Eurelectric. But it warned that plans to ‘void’  UK emissions trading scheme allowances could have unintended consequences.

Last week the European Parliament adopted an amendment to the EU ETS that would automatically void the UK’s ETS allowances if it does not remain part of the scheme.
“The amendment may have been tabled with the right intention, there is a risk of unintended consequences for the functioning of the carbon market,” said Eurelectic secretary general Kristian Ruby. “We urge policymakers to consider carefully the potential impact that such a measure might have on market operations and further Brexit negotiations,” he said.

Eurelectric said policymakers must provide clarity on Phase III and IV of the EU ETS as soon as possible, to ensure that the market remains liquid, to maintain investors’ trust in the trading system, and to avoid any potential abuse of the system. It reiterated calls for clarity on the UK’s continued participation in the scheme for the duration of Phase III to be provided by October.

“The EU ETS is fundamental to the overall functioning of the European energy market,” Ruby said. “A prospective UK exit from the EU ETS will have significant effects on market participants’ behaviour, with impacts on related markets such as electricity. To avoid these negative impacts, measures chosen by policymakers must avoid any unintended consequences for the European companies which are covered by the EU ETS in the run-up to Brexit and beyond.”

 

Gas sharing

The European Parliament has meanwhile approved new co-operation rules to ensure an EU country facing an urgent gas shortage can trigger cross-border assistance from its neighbours.

The new rules establish four “risk groups” of member states, which will take part in “risk associated cooperation” and undertake joint risk assessments and joint preventive and emergency measures.

There will be three energy supply crisis levels – early warning, alert, and emergency – which member states can declare by informing the European Commission and the competent authorities in their risk groups and in adjacent member states.

The European Commission will have the right to request access to any gas supply contracts important for security of supply (representing 28% of the annual gas consumption in the member state). The Commission can also ask for the details of other commercial agreements that are relevant to set up the gas supply contract, including gas infrastructure contracts.
Sufficient gas supply for households, district heating and essential social services such as hospitals take priority.