Key EU lawmaker Peter Liese already eyeing next CO2 price revamp

German EU lawmaker Peter Liese is already eyeing the next revamp of the EU’s emissions trading scheme, wants a CO2 ‘central bank’, and is pushing for his party to stay the course on EU climate targets, he told Euractiv in an interview. 

The EU’s carbon trading scheme, the ETS, has kept a cap on CO2 emissions from industry and the power sector since its launch in 2005. While prices remained low for more than a decade, they surged to €100 per tonne of CO2 in 2022, as the bloc became more serious about climate action. Emissions covered by the ETS then plunged by 15% in 2023.

The latest reform of the ETS framework was informally concluded in late 2022. But Peter Liese, a German centre-right EPP Member of the European Parliament (MEP), who led the negotiations the last time, is already looking to reopen the file.

“It was explicitly discussed with Diederik Samsom [the head of the cabinet of then-Green Deal Chief Frans Timmermans] that the question of what happens from 2030 onwards will of course be discussed again,” Liese told Euractiv.

The MEP handles matters of climate in the European Parliament’s environment committee on behalf of the largest group, the centre-right EPP. 

His rationale is that the last reform put the scheme on track to align with climate neutrality in 2050 – and will phase out CO2 certificates as early as 2039 – but some things are not clear, like what happens to companies who are not fully decarbonised, or how the scheme will interact with other climate frameworks.

“The fact that we will no longer have any certificates in the system from 2039 is, in my view, not easy to implement as it currently stands in the legislation,” he adds. 

According to Liese, the current design means that “Cement and chemical companies that do not manage to become climate-neutral by 2039, but only three or four years later,” are in trouble and may relocate their factories.

“Climate neutrality is a must,” he says, adding these companies need a chance to continue “producing in Europe.” 

His solution? “I was already of the opinion during the legislative process that we need to include negative emissions,” explains the German lawmaker.

This goes to the heart of an ongoing debate among carbon pricing experts, where two distinct camps argue back and forth on whether the EU’s ETS should include verifiable ‘negative emissions.’ 

“Technical sinks,” meaning the capture and subsequent storage of CO2 – the most permanent form of carbon storage – “would certainly be a solution,” Liese says. 

A Carbon Central Bank for Europe

But who tracks these carbon removals, and who gets to “print” a corresponding CO2 certificate, so that a cement factory can continue emitting CO2 in Europe beyond 2039?

Among experts, the concept of a ‘carbon central bank’ has been gaining traction. Treating CO2 like a currency would mean a central body could control and manage it. 

Liese argues that the approach is “particularly relevant” when it comes to less permanent CO2 sinks.

Things like “carbon farming, reforestation, and similar things, where we simply cannot say for sure that the sinks will last as long as we need them, but we still need incentives,” for their upkeep, he elaborates.

And then there’s the second aspect such a central bank could provide: a long-term stability perspective and insulation from changing political circumstances  – something that the ETS is in dire need of after prices plunged 50% last year.

Will CO2 prices recover?

Liese blames the price crash on the 2022 energy crisis and subsequent drops in industrial output. 

“The companies that act as buyers of ETS certificates have produced less and therefore purchased fewer certificates. This is the main reason for the price slump,” he said.

But some of the plunges are also by design, he conceded: “As the EPP Group, we have deliberately emphasised, both in the context of the ETS and REPowerEU, that we do not want to push the price to extremes now.”

Analysts point to a fire sale of 20 million CO2 certificates as another reason for the slump. These certificates were sold earlier than planned, to raise cash for the bloc’s REPowerEU transition away from Russian gas as another reason for the fall in price.

Industry should make the most of the current price slump, Liese explains: “There is now a phase in which companies can take a deep breath to plan and tackle their investments. “

“The number of certificates will become significantly more scarce from 2027 onwards. And anyone who has not invested or started to invest by then will pay very dearly in the long term.” 

That is, as long as climate targets and the sharp reduction trajectory of the ETS are upheld. 

He is “personally determined that we will achieve the climate targets,” Liese said – but acknowledged that his political party will require some convincing. 

“I am also campaigning for this in my parliamentary group. In the discussion about the 2040 target, I was also very much in favour of not tampering with the existing targets.”

[Edited by Donagh Cagney/Rajnish Singh]