The EU Emissions Trading Scheme (ETS) is sinking under the weight of a potential 1.6 billion surplus emissions permits and equivalent offset credits available between now and 2012, says a report by UK-based campaign organisation Sandbag.
The report, Why the flagship ‘EU Emissions Trading Policy’ needs rescuing says that in order to maintain leadership on climate change, the EU must be honest about the problems the ETS is experiencing and commit to resolving them.
At a time when other countries are looking to set up their own trading schemes and the world is set to debate a global deal on how to tackle climate change, the ETS, as the EU’s flagship policy on climate change, cannot be allowed to fail or fall short, adds the report.
This is due to various reasons, including the fact that a deal at Copenhagen will only be reached if the EU is displaying significant effort and ambition in cutting its own emissions, in particular those under the ETS.
Another reason is that developing countries will be looking to the EU to follow its own advice on achieving low carbon growth as it moves out of the recession.
Given that the scheme covers 50 per cent of all EU carbon emissions, whether it’s working or not goes a long way towards determining whether EU efforts to tackle climate change are up to scratch. And at the moment the good ship ‘ETS’ is in need of rescuing.
As with any market, huge surplus supply means that the price, in this case of carbon, will stay low. This means that it is cheaper for companies to buy surplus permits and credits to meet their ETS caps, than make the investments they need to actually cut their own carbon. In fact, the EU could hit its targets for the next seven years just through using up the 1.6 billion surplus, but standing on making genuine cuts to emissions.
The report analyses how has this happened. The primary reason, according to the report, is that the caps on emissions under the scheme were set politically rather than in line with the science of climate change, so they were set too high. In addition, heavy industry succeeded in getting massive allocations of permits after another round of special pleading and lobbying within the EU.
A mixture of overallocation and the recession now means that rather than the ETS costing industry money, they could make 5.4 billion Euro from selling their spare permits. Even with high caps the EU was still worried it would be too difficult for countries and companies to meet so allowed for millions of offset credits from overseas to be treated as equivalent to emissions cuts at home.
Sandbag is pushing for action to tighten the caps under the ETS and remove some of the hot air in the system. The report expresses the hope that it’s easy for the EU to up their game, and get the ETS back onto safe waters. With so many surplus permits in the system, EU can now cut their emissions by 30 per cent against 2005 levels with ease, and cheaply too.
The Big Five polluters
Germany, the UK, Spain, Poland and Italy are the five biggest polluters in the EU making up 66 per cent of 2008 emissions. Germany emerged the highest in the list, with its contribution of 24.5 per cent of total EU emissions in 2008, up from 24 per cent in 2005.
They are also the countries required to make the largest reductions in their emissions covering 95 per cent of the total reductions required under the whole ETS, of which 70 per cent will come from the UK and Germany.
The report, Why the flagship ‘EU Emissions Trading Policy’ needs rescuing says that in order to maintain leadership on climate change, the EU must be honest about the problems the ETS is experiencing and commit to resolving them.
At a time when other countries are looking to set up their own trading schemes and the world is set to debate a global deal on how to tackle climate change, the ETS, as the EU’s flagship policy on climate change, cannot be allowed to fail or fall short, adds the report.
This is due to various reasons, including the fact that a deal at Copenhagen will only be reached if the EU is displaying significant effort and ambition in cutting its own emissions, in particular those under the ETS.
Another reason is that developing countries will be looking to the EU to follow its own advice on achieving low carbon growth as it moves out of the recession.
Given that the scheme covers 50 per cent of all EU carbon emissions, whether it’s working or not goes a long way towards determining whether EU efforts to tackle climate change are up to scratch. And at the moment the good ship ‘ETS’ is in need of rescuing.
As with any market, huge surplus supply means that the price, in this case of carbon, will stay low. This means that it is cheaper for companies to buy surplus permits and credits to meet their ETS caps, than make the investments they need to actually cut their own carbon. In fact, the EU could hit its targets for the next seven years just through using up the 1.6 billion surplus, but standing on making genuine cuts to emissions.
The report analyses how has this happened. The primary reason, according to the report, is that the caps on emissions under the scheme were set politically rather than in line with the science of climate change, so they were set too high. In addition, heavy industry succeeded in getting massive allocations of permits after another round of special pleading and lobbying within the EU.
A mixture of overallocation and the recession now means that rather than the ETS costing industry money, they could make 5.4 billion Euro from selling their spare permits. Even with high caps the EU was still worried it would be too difficult for countries and companies to meet so allowed for millions of offset credits from overseas to be treated as equivalent to emissions cuts at home.
Sandbag is pushing for action to tighten the caps under the ETS and remove some of the hot air in the system. The report expresses the hope that it’s easy for the EU to up their game, and get the ETS back onto safe waters. With so many surplus permits in the system, EU can now cut their emissions by 30 per cent against 2005 levels with ease, and cheaply too.
The Big Five polluters
Germany, the UK, Spain, Poland and Italy are the five biggest polluters in the EU making up 66 per cent of 2008 emissions. Germany emerged the highest in the list, with its contribution of 24.5 per cent of total EU emissions in 2008, up from 24 per cent in 2005.
They are also the countries required to make the largest reductions in their emissions covering 95 per cent of the total reductions required under the whole ETS, of which 70 per cent will come from the UK and Germany.
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