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Brussels wants to raise €20bn to fund the EU’s exit from Russian energy by selling surplus carbon emissions permits — a move that risks hitting the bloc’s climate goals by making it cheaper to burn fossil fuels.
The European Commission is looking at auctioning off part of a stock of Emissions Trading Scheme certificates, EU officials and diplomats told the Financial Times. The permits allow their users to emit more carbon.
The commission has a plan for Europe to invest around €200bn by the end of the decade to try to shift away from its dependence on Russian energy, by investing in new infrastructure and alternative supplies.
However one effect of pushing more certificates into the market would be to drive down the carbon price, which will be contentious among some EU member states because it would lower the cost of using coal, oil and gas. That would hit the emissions reduction goals in Europe’s so-called Fit for 55 plan.
“Flooding the market with ETS certificates will only raise emissions and makes the Fit for 55 targets even more difficult to reach. It is bad climate politics,” said one EU diplomat.
Brussels’s RepowerEU energy blueprint, which is due to be published on Wednesday and which could still be changed, says renewables are the best way to fight climate change and achieve energy independence but that the EU will also need fresh sources of fossil fuels to reduce its reliance on Russia.
The commission strategy will also set out measures to save energy, diversify fuel supplies from Russia, and bolster investment in clean energy as part of a drive towards greater self-sufficiency.
The EU wants to phase out Russian fossil fuels by 2027, but the drive is proving politically divisive and difficult to engineer. Efforts to impose an oil embargo on Russia are stalled because member states cannot agree. Landlocked countries such as Hungary want more time to cut their need for Russian oil.
The commission’s plan would involve selling between 200mn and 250mn ETS certificates from a so-called Market Stability Reserve. The reserve has grown since the ETS was established in 2009 because renewable energy was deployed more quickly than expected and slow growth damped industrial activity and therefore emissions.
The commission has not sold the certificates to avoid depressing the price of emissions and now has 2.6bn in the reserve.
Brussels believes it replacing Russian gas will require temporary use of alternatives such as LNG and coal, which have higher carbon footprints. Brussels says it can still hit its target to reduce emissions by 55 per cent of 1990 levels by 2030.
“You can be certain that when this commission proposes such a measure it is done after very thorough analysis and in full respect of the necessary emissions reductions that are set in the Climate Law,” said a commission official.
Some member states may push the commission to guarantee that fewer certificates are issued in future to ensure the binding climate targets are hit.
Claude Turmes, Luxembourg’s energy minister, said: “We cannot go back to more fossil fuels. You need to make sure we don’t slip on the total carbon budget between now and 2030.
“We should use the current crisis to speed up our work on renewables and energy efficiency to keep on track for our climate goals.”
Matthias Buck, Europe director of campaign group Agora Energiewende, said that the plan would lead to more emissions. “These are emissions that would never have happened without this plan. It is good news for Polish and German coal-fired power plants, which can operate for longer.”
The commission declined to comment.
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