Checking upon the ETS system: why the model must be improved

Speaker: Simone Mori, Executive Vice President, Regulation, Innovation and Environment,  Enel Group

The slowdown of the global economy has produced a negative pressure on carbon prices – due to a decreased industrial production thus generating lower emissions – and pushing the industrial system towards a rescheduling of their low carbon and energy efficient capital expenditure. The outlook for the European Economy remains gloomy and is not to be compared with the one we were facing as the EU ETS was designed.

Current CO2 prices are in the range of 7 €/t for spot deliveries, while the 2020 forward price is below 14 €/t. Uncertainty over European and international regulation is also playing a key role in these market trends.

At European level, legislation on energy efficiency and renewables overlap with the ETS and increase uncertainty about the price signal. At international level, while Durban confirmed the long term 2°C target with the contribution of all countries under a common legal framework, goals until 2020 are globally weak and do not provide additional demand for emission reductions.

Low carbon prices hence allow to comply with caps at a lower cost. However, extreme levels and their persistence have a negative impact on low-carbon long-term investments and are fostering a debate over the effectiveness of the ETS system itself. No short-term action on the ETS may let prices fall even further, leading to the collapse of the carbon market.

The speaker will offer his views and hints for a debate.