He was speaking ahead of a meeting tomorrow of the European Parliament’s Plenary, which will vote on EU Emissions Trading Scheme back-loading proposals, a measure designed to address the current surplus of carbon allowances in the market.
The impact of the surplus has been to push down the value of the carbon price and therefore undermine low-carbon investments.
Davey said today: “The current low carbon price, caused by the large over-supply of allowances in the market, risks damaging growth and investment in green technologies.
“Removing some of these allowances over the next few years would help to restore confidence in the market, before longer-term reforms to strengthen the system can be brought in.”
He warned that any delay “could lead to greater costs in the long-term in meeting the EU’s 2050 objectives and would undermine the move to a low-carbon economy”.
“If back-loading and structural reform are not supported, member states may adopt unilateral policies to deliver their energy and climate objectives and stimulate investment, creating a complex patchwork of climate legislation across the EU that is inefficient and increases regulatory burdens on industry,” he added.
He said that the EU Emissions Trading System is a “cornerstone of climate change policy, which ensures that emission reductions in energy intensive industries are achieved at the lowest cost”.