January 21, 2020 / 12:53 PM / a month ago

Germany to ensure coal exit doesn't undermine EU's CO2 trading system: draft

FILE PHOTO: Brown coal train lorries of RWE Rheinbraun filled with lignite are transported near the coal power plant of Niederaussem of German utility RWE, west of Cologne, Germany, January 16, 2020. REUTERS/Wolfgang Rattay/File Photo

BERLIN (Reuters) - Germany wants to ensure that its plan to cancel emissions certificates issued for coal power stations that are due to be shuttered doesn’t undermine the EU’s emissions trading system, the government said in a draft law seen by Reuters on Tuesday.

It plans to achieve this by making use of the EU’s Market Stability Reserve, a mechanism that went into effect last year with the aim to take back excess permits from the market.

The government proposal also stipulates that the German finance and economy ministries will work with at least two independent appraisers to determine how many certificates placed in the EU reserve should be cancelled.

Chancellor Angela Merkel’s government wants to shut all of Germany’s coal-fired power plants by 2038 at the latest as part of measures to help it achieve a target of cutting greenhouse gas emissions to 55% of their 1990 level by 2030.

The draft says Germany would inform the EU about the scale of permissions in the emission permits reserve it wishes to cancel in the calendar year after the power plants had been shut down.

Germany will then issue fewer carbon certificates to ensure its coal exit doesn’t exacerbate a surplus of emissions permits that has built up in the EU, leading to lower carbon prices and weaker incentives to cut emissions.

The draft also says that Germany will force the closure of power plants fired by hard coal starting in 2027 if utilities do not take up compensation tenders, a U-turn that appears to be designed to pressure utilities to accept compensation.

The government said in a draft last year it would not force hard coal power plants to close over the next seven years and that it would use a mixture of subsidies and tenders to encourage operators to close polluting plants.

The government proposal said tenders for compensation would be assessed between 2024 and 2026 and forced closures would ensue if utilities operating hard coal plants failed to apply.

Reporting by Markus Wacket; Writing by Joseph Nasr; editing by David Evans

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