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Green Deal Must Tighten EU Carbon Market Cap, Netherlands Says

Green Deal Must Tighten EU Carbon Market Cap, Netherlands Says

(Bloomberg) -- The European Union needs to tighten its 2030 emission-reduction target next year and impose stricter pollution limits on companies in the world’s biggest carbon market, according to the Netherlands.

Plans by incoming European Commission President Ursula von der Leyen to make Europe the first climate-neutral continent by 2050 triggered the Dutch assessment published Monday. Achieving that goal will require an unprecedented transformation of the EU economy, impacting everything from transportation and farming, to energy production and the design of cities.

The first step toward the transition must be an agreement by the EU heads of government to endorse the net-zero emissions goal for the middle of the century at their summit in December, according to the document. Countries should then agree to boost the EU ambition for 2030, deepening the current goal of cutting carbon by at least 40% compared with 1990 levels.

Green Deal Must Tighten EU Carbon Market Cap, Netherlands Says

“The Netherlands wants the 2030 target to be increased to 55%, to be agreed on in 2020,” it said, adding that the toughening should be translated into rules governing areas such as the EU Emissions Trading System, forestry, biofuels, vehicle emissions or energy efficiency for appliances.

The European carbon market, or the EU ETS, imposes decreasing pollution limits on almost 12,000 installations owned by utilites and manufacturers. The cap shrinks by 1.74% annually in the current 2013-2020 trading period and the pace is set to rise to 2.2% as of 2021. Reaching the 2030 climate goals needs those pollution caps to taper at a faster pace, the Dutch said.

Such a move would put more pressure on carbon prices after they jumped five-fold in the past three years following a reform that shored up oversupply of allowances. The benchmark permits for delivery in December traded at around 24 euros ($26.42) on Monday.

The Netherlands also renewed its call for a carbon floor price. Frans Timmermans, the incoming commission vice-president who will oversee the Green Deal, said last month he didn’t see the merits in introducing such an instrument in the cap-and-trade market.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Jonathan Tirone

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