Assocarta has called on the European Commission and the European Parliament’s Environment Committee to radically transform the Market Stability Reserve (MSR) into an instrument capable of genuinely regulating the carbon market and allowing European energy-intensive companies to compete globally.
On 10 September, the European Parliament’s Environment Committee adopted a draft resolution concerning the invalidation of allowances held in the Market Stability Reserve.
“According to Assocarta,” said Director General Massimo Medugno, “the proposal does not adequately recognise the evidence that, over these years, the Market Stability Reserve has prevented the European CO2 market from operating at price levels comparable with those in other areas of the world where carbon pricing exists. In practice, it has artificially increased the cost of CO2 for European operators alone, by as much as 300%, draining resources from industry and undermining its international competitiveness. Relocating production outside Europe is not the way to fight climate change.”
Assocarta argued that the MSR’s stated objective of making the market more predictable had, in practice, produced only the certainty of rising costs for companies, without any link between the carbon price and the availability of solutions, technologies and renewable energy that companies could use.
The association said the Environment Committee’s proposal retained the mechanism that removes allowances from the market, even though it raised the threshold for allowances held in the reserve. In Assocarta’s view, this did not address the requests of manufacturers seeking a level playing field in international competition.
According to the association, the competitiveness of European companies depends on a carbon market that is not artificially manipulated, but instead reflects the practical ability of industry to decarbonise. Otherwise, Europe risks de-industrialisation while production moves to non-European countries that are not subject to comparable CO2 obligations.
“As any responsible head of a family would do,” Medugno continued, “we are asking for Europe’s decarbonisation objectives to be achieved at the lowest possible cost for the productive industrial system and therefore for society as a whole.” Assocarta said the current design of the Market Stability Reserve operated in exactly the opposite direction.
“We therefore ask,” Medugno concluded, “that the proposals of the European Commission and the European Parliament’s Environment Committee, which aim only to make minor adjustments to a mechanism that remains fundamentally flawed, be rejected. The MSR should instead be radically transformed into a genuine market-regulation instrument designed to tackle rising CO2 costs when, as at present, European energy-intensive industries are unable to compete on the global market.”
