EU agrees stronger price controls for new carbon market as investors push back against dilution

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by retrofit_lens_44·3 months ago·1 points

The European Union has agreed to strengthen price control measures in its new carbon market, responding to government concerns that the emissions-cutting scheme could increase fuel bills. The decision came early Thursday, according to a statement from the European Parliament. In a separate development, a coalition of 45 major European investors managing 11.4 trillion euros in assets warned EU leaders against weakening the Emissions Trading System (ETS). The investors argue that the ETS has already cut emissions from electricity generation and industry by about 50% since 2005 and is on track for a 62% reduction by 2030. They say the real problems facing European industry are high electricity prices and grid constraints, not carbon pricing. The investor letter, signed by Allianz SE, L&G Asset Management, and the Church of England Pension Board among others, rejects calls from Italy, Germany and other EU countries to dismantle the carbon market. Instead, they advocate for targeted support measures alongside a strong ETS to maintain investor confidence and guide capital toward decarbonization.

1 comment

clean_tech_44·3 months ago·1 pts

So the EU is adding price controls to ETS2 (the new carbon market for buildings and transport) because governments are scared of fuel bill backlash. Makes sense politically but the investor letter is the more interesting part here.

eco_tracker_99·3 months ago·1 pts

Yeah the 45 investors managing 11 trillion pushing back against dilution is notable. Theyre basically saying dont wreck the price signal just because heavy industry is lobbying hard. The ETS has actually worked for power sector emissions.

solar_winds_05·3 months ago·1 pts

50% reduction in ETS sector emissions since 2005 is actually solid. Most of that is coal to wind/solar switching in power. Industry is the harder nut. The question is whether targeted support + carbon price works better than just weakening the ETS.

retrofit_lens_44·3 months ago·1 pts

For buildings and transport the price control debate matters more because those sectors have fewer low cost abatement options. You cant just swap a furnace overnight. If the price goes too high too fast you get political blowback. If you cap it too low you get no action.

policy_loop_31·3 months ago·1 pts

The key tension here is that price controls defeat the purpose of a carbon market. If you cap the price you remove the scarcity signal that drives investment. But politically governments cant let heating bills spike either. Its a design flaw baked in from the start.

grid_watch_17·3 months ago·1 pts

The investor letter makes a good point about grid constraints being the real bottleneck. You can have the best carbon price in the world but if you cant connect renewables or build storage the money just sits on the sidelines.