On Thursday, December 4th, the European Parliament in Brussels held a hearing on the future of the European Union (EU) greenhouse gas emission trading system, an initiative that will replace the system currently in place that allows European businesses to obtain their emission quotas for free.

Organised with Bellona’s help, the hearing was presided over by European Voice, the main European affairs newsweekly, and gathered together industry representatives and various European organisations and politicians.

Prior to the hearing, the Economist Intelligence Unit, a leading research and advisory firm providing country, industry, and management analysis, had undertaken an opinion survey among prominent representatives of European industry. The results of the survey were presented at the hearing.

Europe to lose two thirds of its businesses?
According to the Economist Intelligence Unit’s research, which encompassed some 300 European companies, two out of three companies surveyed said they were contemplating moving all or some of their European operations elsewhere.

Yet, the main reasons cited were not the costs associated with buying emission allowances or covering any other expenditures that may be incurred by compliance with future environmental legislation. Business owners were far more concerned with costs related to payment of wages, as well as proximity to new markets and more attractive tax incentives expected to be found beyond European borders.

Investing into the future
Bellona Europa director Eivind Hoff participated at the hearing as a member of the panel put together to review the survey’s results and the planned phase-out of free emission allowances currently available to European industry. In Hoff’s opinion, the Economist Intelligence Unit’s data should not be cause for worry.

“What we are talking about here is not facts, but simply viewpoints and opinions. Before emission allowances are granted for free, we need to have proof that it is necessary to prevent relocation of industry outside the EU,” said Hoff.

He added: “In any case, there is a point to make here that emission allowance auctions will mean more money in the coffers of European states. And that money is not going anywhere, is it? It can be used to help businesses reduce their emissions through cleaner and more efficient production practices.”

Politicians hard pressed to let go of current policies
Jorgo Chatzimarkakis, a representative of the liberal Free Democratic Party of Germany and a member of the European Parliament’s Committee on Industry, Research and Energy, is among those who oppose the policy that will put European businesses under the obligation to buy their emission allowances. At the December 4th hearing, he proposed that the current free emission allowance regulations afforded to European businesses remain in place for the near future.

“I don’t see why such a big part of the burden should fall onto Europe,” said Chatzimarkakis, referring to what contribution Europe may be expected to make to the global commitment to reducing CO₂ emissions when it passes its climate legislation package. “Why should we assume such a responsibility before knowing what [US President-elect Barack] Obama or China are going to do?”

He shares the concern that European businesses responsible for CO₂ emissions will move elsewhere if they are forced to pay for expensive environmental obligations – or, as it presently stands, emission allowances.

“We might as well call the European emission trading system a ‘carbon [dioxide] leak system’,” Chatzimarkakis said.

Battlefield Gdansk
At the December 6th meeting that took place in Poland’s Gdansk between representatives of France, which currently holds presidency of the Council of the European Union, and nine Eastern European countries, the issue of auctioning versus free distribution of emission allowances was bound to become a matter of added controversy.

Poland and other Eastern European states insist on being granted exceptions that would allow their businesses to continue receiving CO₂ emission allowances for free.

“That is not necessarily justified, but the most important thing about the emission trading system is not that all the allowances have to cost money,” he added. “The most important thing is that an emissions ceiling is agreed on that will set the limit for how high total emissions can be, and that this ceiling can gradually be lowered – so that emissions are reduced. After all, that’s the main purpose of the system.”