Call on EU to abolish emissions trading scheme
The European Union is being urged to scrap its landmark emissions trading scheme (ETS) by an international coalition of environmental, development and other civil society organisations.
“The ETS is in trouble – big time,” the coalition said, adding that this assessment was shared by most analysts, policymakers, politicians, carbon traders, industrial polluters and non-governmental organisations.
“The EU maintains a scheme which allows polluters and financial ‘market makers’ and speculators to move around pollution permits and cash in on windfall profits without making any significant contribution to halting runaway climate change,” it claimed.
The trading scheme, which covers major energy users such as power generators and heavy industry, was meant to encourage them to reduce their emissions by switching to cleaner technologies. But this presumed a carbon price of up to €30 per tonne.
Last week, the European Parliament’s environment committee backed a reform package aimed at rescuing the scheme by deferring the auction of some 900 million surplus allowances in an effort to boost the price of carbon, currently about €5 per tonne.
According to Thomson Reuters Point Carbon, this oversupply reduced the carbon market’s value last year for the first time since the ETS launched in 2005. Globally, the market was valued at €62 billion in 2012, down 35 per cent from €96 billion in 2011.
The carbon price is so low as a result of an over-allocation of free allowances during the boom years, the effects of the recession and a growing use by companies of mechanisms that allow them to offset emissions by purchasing carbon credits abroad.
Such offsets “actually increased emissions while causing land grabs and human rights violations, community displacements, conflicts and increased local environmental destruction”, said Isaac Rojas of Friends of the Earth Latin America and Caribbean.
An analysis endorsed by the Scrap the ETS coalition noted that it had also produced “staggering windfall profits to Europe’s largest polluters – profits that likely will have financed further fossil fuel capacity, not a transition to a post-carbon economy”.
According to the analysis, “it is ludicrous to assume that postponing the auctioning of some 900 million permits could turn around a market that has been described as being in a state of ‘regulatory omnishambles’. Withholding these permits will not push the price of carbon permits from below €5 to above the at least €30 to €50 widely considered as the minimum to serve as a signal against fossil fuel-based, large-scale energy infrastructure investment.”
It said “market makers” such as Deutsche Bank, Morgan Stanley, Crédit Agricole and Barclays were increasingly scaling back or closing down their carbon trading activity and the proposed “backloading” would have little effect on the price of carbon.
One of the coalition’s concerns is that the EU’s ETS has become a model for other countries and regions. China is setting up a system with EU support, while Brazil, South Korea, Australia, California and Quebec have similar plans.