Several changes to the Commission proposal for a Market Stability Reserve (MSR) has been adopted by European Parliament’s Environment Committee has adopted . The committee introduced an earlier implementation already in 2018 instead of 2021 and immediately refers 900 million allowances into the Reserve. In addition, it proposes to put hundreds of millions of allowances from plant closures into the reserve. As a result the carbon price will increase. The assumption is that this will trigger a technology shift in particular in the power sector. At the same time the committee has decided that the ETS, at the level of the most efficient installations, must not lead to direct and indirect costs for sectors exposed to global competition.
“We welcome today’s decision by the environment committee to safeguard sectors exposed to carbon leakage, such as the steel industry, at the level of the most efficient installations. This is a strong signal reinforcing the October Council mandate towards the Commission, which should now make a similar commitment in order to establish predictability for industry”, said Axel Eggert, Director General of EUROFER.
EUROFER also welcomes the committee’s proposal to provide additional funding for the demonstration phase of promising innovative technologies. It is key that policy provides the optimal incentives to plants to reach the best available level. Decisions to invest in Europe can only be made if the climate and energy targets are technically and economically feasible and do not lead to costs which our global competitors do not have to bear. An early start of the Market Stability Reserve will however not provide this incentive to the steel industry. The reason is that the steel sector will be increasingly short of allowances well before 2021 and CO2 impacts on electricity prices continue. Therefore, EUROFER has concerns on the proposal to introduce the Reserve already in 2018. “This will substantially increase carbon and electricity prices already three years before improved and adequate measures against carbon leakage come into force in 2021, for which the details are not yet known. For this reason, we plead that the measures against carbon leakage will be introduced at the same time as the Market Stability Reserve, based on realistic impact assessments for industrial sectors such as steel,” says Eggert.