BRUSSELS (Reuters) – The European Union should impose policies to underpin fossil fuel prices to protect the bloc’s climate ambitions during its recovery from the coronavirus pandemic, the French government said.
FILE PHOTO: Activists protest against the carbon dioxide emissions trading in front of the World Congress Centre Bonn, the site of the COP23 U.N. Climate Change Conference, in Bonn, Germany, November 17, 2017. REUTERS/Wolfgang Rattay/File Photo
EU ministers met on Tuesday to discuss the role of energy markets when the health crisis ends. Most EU countries believe the bloc’s recovery plan must uphold its Green Deal policy to decarbonise by 2050.
In a document sent to ministers ahead of the virtual meeting and seen by Reuters, France called for the EU to use taxes or its carbon market to prevent “extremely low prices” seen during the pandemic from thwarting climate ambitions.
“The cost of fossil energies should be proportionate to their true environmental impact,” the document said.
Some countries including the Netherlands and Austria voiced support for the French price floor plan, according to three EU officials.
Countries such as Poland backed other parts of the proposal, including a call to quickly impose carbon charges for imports into the bloc.
The Polish government warned last month that the economic hit from the pandemic will make EU climate policies harder to achieve.
The European Commission plans next year to review EU energy taxation rules and the emissions trading system (ETS), a carbon market policy that forces industry to pay for the carbon dioxide emissions.
But France called on the EU to take steps “without delay” to bolster the ETS market stability reserve, which removes surplus carbon permits from the system to avoid a build-up of supply.
With Europe headed for a steep recession, the fear is that the ETS could suffer the same fate after the 2008-2009 financial crisis when lower prices for carbon permits provided little incentive for firms to curb their pollution.
Energy prices in Europe have plummeted because of lockdowns during the pandemic.
The benchmark European API2 coal futures price hit $52.00 a tonne on Tuesday, its lowest level since June 2016.
Prompt benchmark European gas prices in Britain and the Netherlands have also hit record lows.
So far, lower fossil fuel prices have not boosted coal-fuelled generation because of low power demand.
But those supporting a strong carbon price want to ensure there is no rapid increase in fossil fuel power production when Europe’s economy recovers.
Commission president Ursula von der Leyen on Tuesday said her Green Deal plan to decarbonise Europe’s economy by 2050 should serve as the bloc’s “motor for the recovery”.
Reporting by Kate Abnett, Susanna Twidale, Philip Blenkinsop; Editing by Jan Harvey and Grant McCool