VCI welcomes emissions trading “course correction”, calls for faster action

Frankfurt, Germany — The German Chemical Industry Association (VCI) has described the European Commission’s initial adjustment to the EU emissions trading system (ETS) as a positive “course correction,” while calling for “fast, decisive” further action.

In a 1 April statement, VCI said the Commission was carrying out a practical review of the ETS and has proposed changes to the 'market stability reserve', including halting the deletion of certificates.

The Commission announced earlier that day that it had proposed an amendment to the 'market stability reserve' decision to strengthen the instrument, which ensures a "stable, well-functioning carbon market."

Under the current system, all allowances in the reserve above 400 million are invalidated.

The proposed amendment will stop the invalidation mechanism, allowing these allowances to be kept as a buffer that can support market stability.

“It is very positive that the market stability reserve is to be adjusted. Not deleting any more certificates is an important step,” VCI said in its statement

At the same time, the association criticised the lack of clarity on future benchmarks.

A commitment, said VCI, is needed “not to tighten the so-called benchmarks and thus to maintain the freely allocated emission allowances at the current level.”

The VCI also called for longstanding methodological issues to be addressed, including “weaknesses in the definition of the heat and fuel benchmark” and “unintended industrial policy collateral damage.”

Commenting on the adjustments, VCI managing director Wolfgang Grosse Entrup said the Commission was recognising "the fundamental problem in the design of emissions trading."

Many requirements of the scheme, said the VCI leader, "ignore the reality in the companies.” 

“Companies are supposed to reduce emissions without the prerequisites for this being in place," Grosse Entrup said.

Such process, he noted, could be "ineffective in terms of climate policy and economically extremely dangerous.”

Grosse Entrup warned that without further changes, Europe risks losing industrial investment: “If Brussels does not make consistent improvements now, there is a risk that investment and value creation will continue to migrate out of Europe.”

Calling for urgent action, the VCI leader added that the adjustments "must be quickly followed by larger steps with further rapid adjustments. A snail’s pace is not enough.”

Looking ahead to the upcoming revision of the ETS, the VCI stressed that key conditions for industrial transformation remain unmet.

These, it said, include “sufficient grid connections, competitive electricity and hydrogen costs, and a functioning infrastructure for hydrogen and CO2 (CCU/CCS).”