Concern about emissions trading scheme affecting the impact of renewables

eid2g-02Damian Carrington writes in the Guardian about the effects of an oversupply of carbon permits in the EU’s Emissions Trading System (EU ETS) on other efforts to cut carbon emissions.


EU emissions trading scheme ‘set to cancel out renewable energy gains’

Deep problems in Europe’s carbon trading scheme – its flagship climate change policy – are set to cancel out over 700m tonnes of emissions saved through renewable energy and energy efficiency efforts, according to a new report.

The study, by carbon trading thinktank Sandbag, found that a huge oversupply of carbon pollution permits means many are being banked to enable emissions after 2020, when efforts to tackle global warming should be intensifying. These emissions, nearly equivalent to Germany’s annual carbon pollution, will cancel out efforts made in other areas to cut carbon.

The report also warns that Europe’s emissions trading scheme (ETS) is a “global dumping ground” for “dubious” carbon permits created by projects around the world.

“As we have been saying every year, for the last five years, the ETS is in dire need of rescue,” said Baroness Bryony Worthington, Sandbag’s Founding Director. “The patience of civil society and low carbon investors is wearing thin. It is time to get a grip.”

The ETS was intended to achieve carbon cuts in Europe at the lowest cost, by allowing industry to trade pollution permits and thereby ensure the cheapest cuts were made first. But the global recession after 2008 caused a crash in production, meaning there is a now huge oversupply of permits.

The European parliament will vote on 3 July on whether to “backload” (delay the issuing of) some new permits, but a similar proposal was defeated in April. Sandbag argues many permits must be removed entirely. The price of carbon permits on Tuesday was €4.13, far below the €30 analysts say is needed to be effective in cutting carbon.

“Europe could potentially justify banking the slack in its carbon budgets if it was pulling its weight in climate change, but it is currently very far from doing so,” said report author Damien Morris, adding that the EU is not on track to meet its long-term carbon cuts.

Sandbag’s report was criticised by Gareth Stace, head of climate and environment policy at EEF, the manufacturer’s organisation. “To suggest that the deep- and long-running recession, in sectors such as steel, has undermined the ambition of the European trading scheme is naive and short sighted. In the short and medium term, the ETS is achieving its goal.” He said technology to cut carbon in industry, when developed, would be expensive.

Morris said: “Without exception, in aggregate, each manufacturing sector in the ETS is currently oversupplied with free allowances, and manufacturing sectors are likely to accrue even more allowances up to 2020.”

The Sandbag report also found that 1.1bn tonnes of carbon in the ETS were offset by permits from outside Europe between 2008-2012, partly due to a rush to dump permits before some types were banned in 2013. “Europe finds itself the dumping ground for the most dubious offsets projects,” said Morris.

The report found 95% of the offset permits were from schemes, like the destruction of some HFC gases in China, than have since been banned from the ETS due to what Connie Hedegaard, European commissioner for Climate Action, called a “total lack of environmental integrity.”

On the new report, Hedegaard’s spokesman said: “The ETS’s relevance as provider of incentives [to cut carbon] is threatened. We hope that the European parliament and national governments will approve backloading.” He also sounded a warning to industry: “Let me be very clear: the alternative to a well-functioning carbon market is a patchwork of national regulations, instead of a common European policy that creates a level playing field for businesses.”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.