EU Policies and Regulation on CO2, Renewables and Energy Efficiency: A Critical Assessment of Recent Experiences - Green Energy and Efficiency: An Economic Perspective - page 22

Fig. 1 EUA (Emission Unit Allowance) prices in the European market Source Bloomberg

Assuming that the effect of this increase in emissions as a result of backloading at
the end of the period will be more than offset by the aforementioned increase in
demand, the CO 2 price will go up. It is, therefore, a measure basically intended to
reduce the volatility affecting the price of allowances, and thus reduces the risk
perceived by potential investors.
This backloading proposalwas adopted in February 2014.

2.2 Proposals

With a view to strengthening the CO 2 signal price as a driver for decarbonising the
economy and reinforcing effectiveness and ef ciency in bringing down emissions,

two kinds of measures are possible: structural and cyclical.
These measures should also ensure a certain CO 2 price level and stability, in order
to achieve the volume of investment that is needed to attain the targets speci ed.

Structural measures. These measures will help consolidate the improvements
introduced since the EU ETS began and lay the foundations for reducing
emissions in the long term. Some of the main measures are summarised below:

￿

Set post-2020 2030 targets at the earliest possible opportunity to provide

certainty to investments and increase current CO 2 prices through banking.
This intervention will unilaterally increase carbon and energy prices to 2020,
but there is unlikely to be a signi

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cant impact on investment decisions
without visibility of the longer term carbon price.