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Emissions trading and Covid-19


Emissions trading: Covid-19 as a “show-stopper”?

The Covid-19 pandemic triggered a global supply and demand shock, forcing many companies to temporarily shut down their plants. Therefore, there is a risk that this will result in an insufficient allocation of emission certificates. Emissions trading law knows a number of possibilities to compensate for these pandemic-related special effects and thus to prevent misallocations, particularly in times of sharply rising certificate prices.

Options for correction

In an article in the current issue of the legal journal “Recht der Umwelt”, Johannes Hartlieb and Emil Nigmatullin discuss the competent authorities’ possibilities to correct these misallocations. It becomes evident that such corrective measures exist and that they allow compensation for incorrect allocations. They have to be granted by means of an official decision and agreed with the European Commission.

Correcting misallocations can prevent excessive burdens for companies which are currently in a transformation process towards renewable energies and thus refrain from investing in future technologies. Another issue at stake here is “carbon leakage”. In the short term, a cut in allocations can help to protect the climate; in the medium and long term, however, this poses a threat to the industrial transformation process, which is only just getting underway.

 

10. May 2021

 
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