Europe Seeks to Overhaul its Carbon Market

In 2005, the European Union (EU) created an Emissions Trading System (ETS) to reduce greenhouse gas emissions from covered sectors of its economy, including power and heat generation, industrial manufacturing, aviation and maritime transport. The ETS is essentially a cap-and-trade program whereby the EU sets a limit (i.e., cap), that declines over time, on aggregate greenhouse gas emissions. Obligated entities are then required to obtain allowances for their covered emissions. All 27 member countries of the EU plus four additional European nations participate in the ETS.

The European Commission, which is the Executive Cabinet of the European Union, recently proposed changes to its Emissions Trading System, including extending the phase-out date for free carbon allowances and reducing the speed at which emission credits are removed from the marketplace. Supporters of the proposal see it as a necessary adjustment to help tame high energy costs and make EU member countries more competitive in the global economy. The proposed changes can also be seen as the Commission acknowledging that cost of living and affordability are genuine issues right now.

Closer to home, California, Oregon and Washington State all have state programs that assess a price on carbon emissions. And while New York has delayed the regulatory deadline for its own cap-and-invest program, the state is still on track to implement the program in the coming years. In addition, 11 eastern states participate in the Regional Greenhouse Gas Initiative (RGGI), a carbon emissions trading program that covers electric power plants. Carbon pricing schemes have both a direct and indirect effect on energy companies, including propane retailers, as well as energy consumers who often are saddled with higher costs as a result of these initiatives.

For more information, contact NPGA’s Senior Director of State Advocacy & Affairs, Jacob Peterson.