Emission Trading Scheme controversy in the European Commission

Publish date: March 18, 2011

Written by: Niklas Kalvø Tessem

The European Commission director-general for climate action, Jos Delbeke, came out strongly in favour of changes to the ETS at a stakeholder conference on the Commission’s recent low carbon roadmap for 2050 in Brussels on March 17th.

The conference was introduced by Commissioner Connie Hedegaard and Director-General Jos Delebeke from DG Climate Action, and deputy state secretary Peter Olajos from Hungary. A panel with representatives from Business Europe, Climate Action Network, European Trade Union Confederation and the Centre for European Policy Studies commented on the Commission’s 2050 low-carbon roadmap which sets out a path for reducing domestic EU emissions by 80% between 1990 and 2050. The Commission presented its vision for green growth in a longer perspective, which was welcomed by all stakeholders, because it creates new jobs, as well as curbing emissions. Yet the measures to achieve it remain controversial.

Emissions trading

The Commission has proposed to set aside emission allowances in the ETS that would otherwise be auctioned. Delbeke explained that such a set-aside could be gradual and that it would not mean allowances would be cancelled. The purpose would be to push allowance prices upwards as well as creating greater predictability of prices. It represents a departure from the earlier belief of the Commission that only the cap on emission allowances should be set politically and that the market should be left to its own devices to set their price. A set aside would help incentivise investments in low emission technologies.

“It is necessary to introduce measures rather than targets. The use of energy efficiency must be speeded up and we need to optimise use of the ETS,” said Delbeke.

Global carbon trade

The use of carbon offsets to provide emission cuts by paying for emission reductions elsewhere in the world is controversial. Firstly, there is no agreement to multilaterally prolong the existing Kyoto mechanisms after 2012. Secondly, flaws in the CDM design have created perverse incentives that may actually increase emissions. Finally, Delbeke pointed out that the CDM may actually encourage industries to move production outside the EU, known as carbon leakage.

“Money may go to foreign competitors of European producers to pay them to do things that are normal in the EU but not in China,” Delbeke said. 

Representatives of industry also agreed that setting limits to offset credits was not a threat to the creation of a global carbon market. Such a market would best be created by linking domestic cap-and-trade schemes in all the major emitting countries.

The Roadmap for building a competitive low-carbon Europe by 2050 was launched earlier this month and suggests EU domestic emissions reduction (i.e. excluding emission credits from abroad) from 1990 levels of 25% by 2020, 40% by 2030, 60% by 2040 and 80% by 2050.

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