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New EU Emissions Trading Scheme – how to mitigate the risks for European consumers and SMEs?



Warsaw, 19 October 2021

 

New EU Emissions Trading Scheme – how to mitigate the risks for European consumers and SMEs?

 

The emissions trading scheme (EU ETS) cannot be regarded as functioning in accordance with the idea of a free market since the underlying mechanisms artificially limit the supply of allowances. In the ETS there are two groups of buyers. First, installations, that need allowances to conduct their business activities. Second, investors, that can substitute allowances for pretty much any other financial instrument. Investors face little to no risk, while installations have to buy EU allowances (EUA) at any price. Moreover, the econometric analysis leads to a conclusion that there is a bubble forming on the EUA prices. These are the key conclusions from the report “EUA price bubbles and competitiveness” published by ZPP.

Today (19/10) ZPP together with SME Connect and European Enterprise Alliance has hosted an online discussion ‘New EU Emissions Trading Scheme – how to mitigate the risks for European consumers and SMEs.’ The keynote speech was delivered by MEP Marian-Jean Marinescu who’s stated that ‘Fit for 55 is one of the most critical legislation packages ever introduced by the European Commission regarding the impact on the people and industry.’

According to Dr Horst Heitz Chair of the European Steering Board of SME Connect, Executive Director SME Europe of the EPP, Fit for 55 ‘is now a one-sided discussion.’ Discussion about growth and jobs should not be separated from the debate about environmental targets. Otherwise, it will be impossible to avoid social consequences.

The reality is that we have two speed Europe. Imbalances can quickly rise if we don’t mitigate these differences. Reducing CO2 emissions is essential yet the current proposal most likely will have negative consequences on citizens and companies in many countries, leading to impoverishment in Southern and Eastern Europe – added Damir Filipovic, Sec-Gen of the European Enterprise Alliance.

Marek Lachowicz, the author of the report on the ETS, stressed that the ETS market structure facilitates the creation of bubbles  and the monetary price drop will not affect it. What’s more concerning is that forcing installation to keep cash in reserves in case of ETS price increase restricts real ways to reduce emission – Lachowicz notes.

The ETS system can be improved, the biggest problem is, however, that the European Commission doesn’t see the problems – concluded Marcin Nowacki, ZPP’s VP.

 

See more: 19.10.2021 Report by the Union of Entrepreneurs and Employers: Forming of bubbles and the competitiveness of the European Union

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New EU Emissions Trading Scheme – how to mitigate the risks for European consumers and SMEs?

The emissions trading scheme (EU ETS) cannot be regarded as functioning in accordance with the idea of a free market since the underlying mechanisms artificially limit the supply of allowances. In the ETS there are two groups of buyers. First, installations, that need allowances to conduct their business activities. Second, investors, that can substitute allowances for pretty much any other financial instrument. Investors face little to no risk, while installations have to buy EU allowances (EUA) at any price…

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