Asset owners call for ‘evolution not dilution’ of EU emissions trading rules
Amidst the on-going ETS review, a joint statement signed by 46 investors has been endorsed by the NZAOA
The world’s first emissions trading system – the EU ETS – is under review. First set up in 2005, the ETS is currently in its fourth phase. Last year, the EU published a consultation on the future of the ETS beyond 2030. A proposal to update the system is expected next month.
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Amidst the review, asset owners have weighed in. A group of 46 investors representing €12tn in assets have published a joint statement calling on European lawmakers to ensure the ETS remains predictable and robust.
Investor interest
The joint statement sets out key investor expectations from the ETS in its next phase. “ETS revision presents an opportunity for evolution – not dilution – and to drive further cost-effective and commercially viable decarbonisation across different sectors”, the statement reads.
Signatories have identified six priorities in particular – long term trajectory for the ETS cap, regulatory consistency, transparent market governance, functional CBAM, ETS revenue use in decarbonisation and targeted sectoral policies.
The joint statement comes ahead of the European Council meeting next week. Signatories include Swedish pension investors AP3 and AP7, Danish pension providers AkademikerPension, Sampension. Velliv and PFA as well as the UK’s Avon Pension Fund and Church of England Pensions Board.
“The EU ETS must remain the backbone of Europe's climate ambition – with real caps, real reductions, and no backdoors”, says AkademikerPension’s head of ESG Rikke Berg Jacoben.
Sampension’s chief ESG officer Jacob Ehlerth Jørgensen also agreed that the ETS’ predictability drives long-term capital allocation for emissions reduction. “It is not a burden – it is a strategic asset for Europe’s economic resilience”, he added.
Asset managers including Nordea Asset Management have also supported the statement. “The ETS is the world’s most successful carbon market”, explains Nordea AM’s head of responsible investment Eric Christian Pedersen.
Pedersen says vast amounts of investments have poured in at the back of the ETS’ price signal.
“Removing or weakening this signal now would amount to pulling the rug from under exactly those companies who have shown due diligence and prepared themselves in time, while rewarding laggards with weak strategic governance”, he adds.
The Net Zero Asset Owners Alliance (NZAOA) has also endorsed the statement.
Co-chairs Josselin Kalifa, Chief Investment Officer of the Caisse des Dépôts Asset Management Division, and Toru Shindo, CIO of the United Nations Joint Staff Pension Fund say the ETS is ‘the most cost-effective tool stimulus Europe can offer’.
The investor statement also urged lawmakers to use next week’s council meeting as a signalling opportunity.
“We urge the European Council to adopt a clear statement at its meeting of 18-19 June in support of a robust and predictable EU ETS that is strengthened as an investment signal.”, it reads.
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