Chocolate, carbon taxes and record highs

Europe's CO2 market continues to break new records, almost daily. Ahead of a flurry of new legislative proposals from Brussels starting in June, key MEP Jytte Guteland highlights what lies ahead for ETS reform and why MEPs seek to end free allocation to industry as part of the carbon border tax proposals.

Listen to a behind the scenes look at EU negotiations, which can often be marathons where only chocolate gets you to the end. 

Host: 

• Richard Sverrisson, Editor-in-Chief Europe, Montel

Guest: 

• Jytte Guteland, MEP for the Social Democrats

Transcript

Anna Siwecka, freelance journalist/podcaster: 0:01

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Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:34

Hello listeners and welcome to the Montel Weekly podcast, bring You Energy Matters in an informal setting. In today's pod, we turn our attention to Brussels and in particular on policies to ensure the EU will meet its aim to be climate neutral by 2015. Joining me Richard Sverrisson today is Jytte Guteland prominent European politician who has been serving as an MEP since 2014. She's a member of the Social Democrats and is the repertoire on the climate law a warm welcome to you, Jytte.

Jytte Guteland, MEP for the Social Democrats: 1:04

Thank you very much. Honored to be here.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:06

A big pleasure to have you on board. How are you doing at the moment? How, what's it like being an MEP in these sort of COVID-19 times? Yatta.

Jytte Guteland, MEP for the Social Democrats: 1:13

I'm getting used to it since, as you mentioned, I've been a member since 2014 and it feels like another. Lifetime. It's completely different. Back then I was traveling back and forth and it was meetings, meetings, meetings. I met hundreds of people every day. Today I think I meet almost the same amount of people, but digitally and remote. I sit in my apartment and I stay in Brussels all the time almost. It's different. But it's working and it has advantage and it has also negative impact. So it's both.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 1:47

You recently concluded negotiations on the climate law, which I mentioned in the intro. You are the UR for, it sounds like it was a marathon session. What were the main sticking points here?

Jytte Guteland, MEP for the Social Democrats: 1:56

Yes, indeed. It was 14 hours the last trial log, and that was actually, we had a number of them before and then also.

At 5: 2:05

00 AM that morning, after that last trial log, we completed and agreed and had a final outcome from the trial log. But there were many things I think from the beginning everyone realized that this is historic. It's important. The proposal from the commission is unique. We are going from this coal and stolen union to be a climate neutral union. So everyone should see that this is a transition that's huge and it has impact on all sectors in society and on us. All that said, we understood or we had the view that we needed to do more on this road towards climate neutrality to make it happen, and also to connect it better to the Paris Agreement, not only to make sure that very day, at least year 2050, we would be climate neutral. We saw that this is not enough. We really need to connect ourselves to the Paris Agreement. So yes, on that final night, it was about that because it was about how fast should we go to 2030. How should we frame the 2050 objectives so that it has more impact on the member states, but also on the future after that, because we need to even have negative emissions. It was also about some of the proposals that we had come further, but we still needed to conclude on the advisory board, on climate, on the greenhouse gas budget and so on. So it was many topics where we were not quite. Ready yet, but we still understood each other, so that was good.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:43

Absolutely. So the tri log, for those listeners who are not aware of that's the discussion between the commission, the EU member states and the parliamentarians, the meps. But can you give us a little bit of a glimpse behind the scenes there? Yet were you all sitting, on two sides of a table? With Marathon? Kind of lots of coffee and snacks throughout the evening. What was it like in the, in these 14 hours

Jytte Guteland, MEP for the Social Democrats: 4:04

I actually brought chocolate. I think this is the good thing about long meetings that I allow myself to eat lots of chocolates. Otherwise I need to restrict myself. It's my absolute favorite. And Brussels is really the city of chocolate. But that said, it was indeed we have this big table. Not everyone is not in the room because of COVID, so we also have participants remotely distance in the room. And then we go through the paragraph. So we go through, oh, how is the paragraph framed? Or How is your text on that paragraph? And our paragraph, and then, okay, we can't agree on that. We can agree on that, but not that. And then we go back to our teams. So I go back to my shadows. The other groups in the PA. Talk about the things that's still difficult, and we say, okay, maybe we can offer them to frame it like this, or drop that thing and then we go back again and have the big room again, and then back to our teams. And then we were doing this back and forth maybe four times. And it takes time.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:10

So quite a lot of horse trading here going on then? Yes. Give and take on a big scale. Yeah. Yeah. What are the next steps you do? What's what happens now? When will it be voted on in parliament?

Jytte Guteland, MEP for the Social Democrats: 5:19

Yeah. We will have this scheduled now, both in the council and in the parliament. So the timeframe. That in, I think they will vote in 5th of May. And in, in the Parliament we will, in the envy committee, we will vote 10th or the 25th of May. And then in, in the big Parliament in Len, we will vote either the second session in in June or the first in July. And after that it's when it's signed, it's 20 days. Until it will go into force in the member states. So in the end of the summer it will be low in, in the European Union, I would say.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:02

Is there any danger that it wouldn't get, won't get passed in the plenary session of the parliament

Jytte Guteland, MEP for the Social Democrats: 6:05

during this year i've been nervous many times, but this is not one of the moments I feel that. We have a minority now, and I would be very surprised if the groups would not support this historic moment. I think it would be politically a suicide for that group. So I assume that the democratic groups will stick together here. The ones who signed onto it. Then of course there are some groups who said already from the beginning that they want even more to 2030. I understand that I would not advise to not vote on the law because I want it to be agreed. So I think that is not a good decision. I think now we need the decision in the parliament, but of course I understand that there are some progressive parliamentarians who wanted more for 2030, but I can assure everyone that. We did everything to make it as progressive as possible, and I really think it is. I really think we have a much better climate law today than with the proposal from the commission.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 7:07

What kind of emissions reductions by 2030 will the law finally deliver? Because I've seen 52.8%, 55%, 57%. What's the number here that will be delivered by 2030?

Jytte Guteland, MEP for the Social Democrats: 7:19

First of all, there is very clear. We have a net target to 55 that's in the law. Then we have an agreement that above that we will also have use the sink in the Lulu c, f legislation so that we get almost 57. But that is a communication that will be done in the same moment. Communicate that it, that will describe that this is what they intend to do now and that we actually, they will say that's an agreement between the institutions. That's the intention that is of course, weaker than the law itself, but it's a very clear political signal together with the climate law that we will use these sinks to achieve more. 57. Then as the Parliament also criticized that this is. Not as high on reduction as we had. We also achieved kinda closing the loophole in the law. That could have meant that we could go lower on reduction. So think from the original proposal it would've been. In fact possible that we could have had 51 in reduction, but with our negotiations we got to 52.8. And that is of course, from the parliaments perspective, it's not the reduction we wanted, but it's. It's stronger than the initial proposal, and in reality it means a lot. It means a lot for the sectors. Every reduction increase that is there will also mean that we are hurrying up the speed of the transition. So I'm also happy about that, that we achieved 1.8 also in, in the reduction part of the net target.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:04

Obviously the role of the EU ETS, the emissions trading scheme is crucial here. How do you think that? Should be strengthened.

Jytte Guteland, MEP for the Social Democrats: 9:13

I think the ETS needs to do a couple of things to make itself up to date. One is that I think it needs to align the line near reduction factor that is steering how much we can pollute every year in this market. Space. The tool that ETS is, and I think important thing is to make sure that we have every year we do more we take away more of these allowances, and by doing that. It will be more and more expensive to buy the ones who are still there every year, and we need to make a calculation now in front of the new target to 2030, and also, of course, the future. How steep does this reduction need to be every year? And I also think we do need to do something about the free allowances because that has been a problem that has prevented the ETS to fully function in some sectors and some industries, I would say, and I don't find it sufficient that we have this free allowances that making some industries maybe get subsidies for continuing polluting. And that is also something. That I think needs to be done this time to make it less of free allowances. My goal is that we should get it away, actually, and I think the Parliament has a discussion in that direction.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:40

In terms of the linear reduction factor you took,'cause currently I think it's 2.2% every year to 2030. What would you like to see it be raised to?

Jytte Guteland, MEP for the Social Democrats: 10:49

We talked about 2.4 loss. Time, but I need to see now after the climate law, we need to look at the calculations actually. So if you look what's the ETS percentage and how can it be done? And then see calculations of that before really telling that this is the number, this is the figure, I think need more assessment of this. And I think it's good that the climate law is ready now. So the commission has also time now. Before they present their proposal to take this into account,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:23

you spoke very clear about ending free allocation to industry. Is this part of also the sort of carbon border tax idea as well, that when that's in place, the carbon border adjustment mechanism, once that's in place, it's easier to cut off the free allowances to the industry or that the two not related?

Jytte Guteland, MEP for the Social Democrats: 11:38

No, they are indeed related. I think that there were problems even before, as I mentioned that this free allocation is going. To, we had one example with the cement sector last period that they actually get a lot, and big part of the cement industry is not exporting, it's goods outside of the eu. So it, it is a very, it's more a local industry than some others because it's heavy. To transport the cement. So you, you don't do that unless it's very in the, if you have the industry extra border, really. So if you look at it as the whole industry, it's not the big global industry there. And they have really benefited from this, but maybe not benefited in a good way for the future because they also need to improve themselves. To be in competition and we cannot serve industries by telling them to go back in history or stay in the history. Then they will not be fit for the purpose for the future. And that's actually a. It's not a nice gift to industry and doesn't help. But then of course, it's the, also the cbam the carbon border adjustment mechanism with many names. I think this tool will also, if in place, when in place we cannot have both these kind of protection for climate, but it's for climate, it's not for industry, but a protection that makes the, in the. The imported goods, they have to pay the same. And then we say, okay, but the global competition is such a big problem for our local industry, so we need to also give them extra support via the system and give free allowances. It doesn't work. We need to choose here. We need to have a combination that's not duplicating. That would also not help the industry if we do the opposite, there would maybe full industry to stay negative old. Techniques. So I think it's not helpful.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:46

We're seeing very strong carbon prices at the moment, then up around 50 euros per ton. And there's been a lot of talk about the role of speculators in driving prices up. What's your view here? Should their role be limited or try to thought some of their activities here?

Jytte Guteland, MEP for the Social Democrats: 14:00

I don't want to draw this very big conclusion out of one week there or there, or some, you need to look at this in a very long term. Perspective. So if the legislator should react to it, I think that should be because if the market is not functioning and we have proof for a very long time, we've seen incidents that is really changing the price structure in a not market. Normal way, I don't think I can judge whether we are there. I think also it's normal that we have higher, from a political point of view, just looking at it, not intending to do anything. So I'm not sending any signals here. I think it is also normal that the price goes up at this point of time and that would also be a very normal market thing. But of course. Should never say never, but in that case, it needs to be a very. Serious investigation that we have a serious problem that has been going on for some while. And because in my view, I'm very positive to having a market-based ETS, that I think it's so clever and still is. And I also think from these years where I've been working with ETS, that I seen that when the legislator are more clear about the transition. Then the price goes up. And I think that's the idea also.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 15:28

Absolutely. I think lots of people will say as well the fundamentals or the market situation, the climate law, the fi 2030 targets, it's all pointing to a very strict reduction of emissions. And that means that, it's gonna cost much more to pollute. We're coming up to a flurry of legislation in June and beyond. What are your expectations here for. The renewables targets and energy efficiency, which are two elements of this.

Jytte Guteland, MEP for the Social Democrats: 15:52

First of all, yes, it will be intense year for the European parliament after the commission has presented the June package or 2030 package, or what you call it. It will definitely mean that all these pieces of legislation, the directives that's out there will have to adapt, so it'll take, its part of what's needs to be done to increase the 2030 target. And of course it will also increase the volume of renewable energy that needs to be produced. I really believe that we will see higher targets, but once again, the political situation is not mature enough at this moment for me to judge where we should be. But I will closely, as every member, I believe, follow what's happening in the commission now and also. We will definitely start ourselves also to do some calculations and see what would be reasonable for the different pieces of legislation to. To take its part of this.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 16:56

Absolutely. So is there a danger here that some of these policies could overlap with one another? That from more energy efficiency, increased renewables could reduce the demand for ETS allowances and maybe weaken the eu. You know that the price signal

Jytte Guteland, MEP for the Social Democrats: 17:12

we should always look out for these kind of, if the legislation doesn't play together as one piano, if it's very divided and it has unintended effects. But I really believe now that we are giving the commission the best possibility to have to present something that will be very much holistic approach. I think we have never been in a better situation to be holistic before. It was a lot like that between the legislating procedures that they didn't intend to go together and now I really believe, yeah, the will is not to make that kind of things happen. And we have a commission that will have time now before it presents the proposals. And the Parliament is also much more up for cooperation between the committees and. Internal market, they all. Transport, all want to cooperate with the environmental committee at this moment. That gives new opportunities for us all.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 18:21

Absolutely. Just finally, y we seeing the terms used here, climate neutral, carbon neutral net zero. What is correct? Are they all correct or is it just semantics here?

Jytte Guteland, MEP for the Social Democrats: 18:32

I would say the net zero is correct For me it's the removals and the reduction and make sure that this is, calculation that will add to zero and we will not get a situation where we have reduction to zero. And if you have a terminology that gives that intention that the reduction will be so we are, we don't have any CO2 emissions at all, then of course that will not be the case. But if with the net target you show that. It is actually possible, but then you need to have also removals with forest, the peatlands or something else that will capture these emissions back so it's not in the atmosphere. So that's the idea here.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:19

Excellent. Many thanks Jytte for being a guest on the Montel Weekly podcast and best of luck with the climate law and beyond.

Jytte Guteland, MEP for the Social Democrats: 19:26

Thank you so much. So nice to be with you

Richard Sverrisson, Editor-in-Chief Europe, Montel: 19:28

and you. Thank you very much too. So listeners, you can now follow the podcast on our own Twitter accounts. Aply named the Montel Weekly podcast. Please direct message. Any suggestions, questions, or let us know if you think you have a good idea for a guest on the show, you can also send us an email to podcast@montenews.com. Lastly, remember to keep up to date with all that's happening in energy markets on Montel News. You can subscribe on Apple Podcasts and Spotify or wherever you get your podcasts from. Thank you and goodbye. I.