National emission trading schemes better option for EnC Contracting Parties than cross border carbon tax

Introduction of national emission trading schemes similar to the EU Emission Trading System (EU ETS) is the best carbon pricing option for the Energy Community Contracting Parties, reads preliminary conclusions of the Secretariat’s study on carbon pricing.

The proposal to introduce national emission trading schemes is better than to introduce the carbon border adjustment mechanism envisaged by the European Green Deal, the document adds.

The presentation of the main preliminary findings of a study on carbon pricing options for the region, which will be finalized next month, was held during the virtual workshop De-Carbon Day, organized by the Secretariat of the Energy Community.

The introduction of national emission trading schemes envisages gradually aligning the carbon price with the EU ETS

Kantor Management Consultant SA and E3 Modelling are preparing the study.

The consultants from E3 Modelling said that five scenarios were considered. The introduction of national emission trading schemes in such a way that the carbon prices would be gradually aligned with the EU ETS, and also coupled with full market integration, is considered as the most cost-effective and socially acceptable option, reads the Secretariat’s press release.

The carbon pricing study will be published in the second half of November

Electricity and gas market integration was considered especially critical in terms of alleviating adverse effects of carbon pricing, accelerating investment into renewables, avoiding stranded costs, maintaining system reliability and mitigating price shocks for consumers.

So far, Montenegro is the only contracting party to introduce carbon tax under the scheme that is similar to EU ETS.

The carbon pricing study will be published in the second half of November and fed into discussions on the Green Deal for the Energy Community at the upcoming Energy Community Ministerial Council.

Carbon pricing would be a more cost-effective option

The participants at the De-Carbon Day also heard the details on the research conducted under the Regulatory Assistance Project (RAP) in cooperation with the Regional Centre for Energy Policy Research (REKK). According to the research, carbon pricing in the contracting parties would be a more cost-effective option compared to a potential carbon border adjustment mechanism.

The tool, also known as CO2 tax could be introduced by the EU for imported products according to their carbon intensity. In July, the European Commission launched public consultations on taxation rules.

A national carbon price would be a more effective decarbonisation tool than a carbon border adjustment mechanism

The research also underlined that a national carbon price would be a more effective decarbonisation tool than a carbon border adjustment mechanism and that it would also enhance market integration and create additional public revenue.

Janez Kopač, director of the Secretariat, said there can be no single energy market without a single carbon price in the long run.

“The alignment of the Energy Community carbon pricing policies with those of the EU would ensure a level playing field in the context of regional and pan-European market integration in the spirit of the Energy Community Treaty. This alignment cannot happen in one step but must start now. This is extremely important to avoid a more expensive energy transition and an increasing gap between the EU and the contracting parties,” he added.