Climate Change, Environment, Europe, Headlines

ENVIRONMENT-EU: Carbon Trading Scheme Challenged

Stefania Bianchi

BRUSSELS, May 15 2006 (IPS) - European Union governments are abusing the bloc’s emissions trading scheme by allowing their industries to produce as much carbon dioxide as they wish at no cost, environmental organisations are warning.

As the European Commission, the European Union (EU) executive, released data on emissions from installations covered by the EU emissions trading scheme (ETS) Monday (May 15), environmental groups said most member states have granted their industries far too generous carbon emission allowances in the period 2005-07.

According to the EU figures, carbon dioxide emissions last year by 21 of the 25 member states were 44 million tonnes below a quota of 1.829 billion tones – the level permitted in 2005. Four member states – Cyprus, Luxembourg, Malta and Poland – do not yet have operational emissions systems.

Most EU members undershot their limits for greenhouse gas emissions, suggesting the bloc had been far too generous in handing out permits to pollute.

Top polluter Germany came in 25.5 million tonnes below its quota. France, the Czech Republic, Denmark, Portugal, Belgium and Hungary were also among the countries below quota.

Unlike many member states, Britain overshot its quota by 33 million tonnes. Spain and Italy were the only two other countries above target.

The Commission published carbon dioxide data for 9,400 installations covered by the trading scheme. Environmental groups say the data shows that so far the EU’s scheme has failed to deliver its environmental objectives.

“The blame goes to the member states that have abused the emissions trading system to protect their industries rather than the climate,” Jan Kowalzig, climate campaign officer for Friends of the Earth Europe (FoEE) told IPS.

“European governments have blatantly ignored the aims behind the ETS and abused the trading scheme, under pressure from their dirty industries. This stalls the EU’s flagship climate policy. Governments need to grab control of the wheel and steer a clear path to emission reductions,” said Matthias Duwe, director of Climate Action Network Europe (CAN-Europe), a Belgian environmental group.

Launched in January 2005, the EU trading regime is designed to help the region comply with the Kyoto Protocol, an agreement among nations to curb output of greenhouse gases, which are blamed for global warming.

It follows the EU’s promise of cutting greenhouse gas emissions by 8 percent of 1990 levels between 2008 and 2012 in accordance with the bloc’s commitment to the Protocol.

Under the ETS – the world’s first such scheme – companies can buy and sell carbon dioxide emissions allowances. Each country gets a certain quota of greenhouse gases it is allowed to emit, and within the country industries get their own quota.

Companies that exceed their allocations are forced to buy extra allowances from ‘cleaner’ companies or face heavy fines. To the cleaner companies the sale can mean extra income.

However, if companies are allowed to emit so much carbon dioxide that few will need to buy leftover carbon tonnes from cleaner companies, the market will never get going. This is currently happening in the bloc.

The EU scheme covers at present about 12,000 industrial units thought to generate about 46 percent of EU greenhouse gases. The quota significantly excludes transport, the fastest growing pollutant, and household energy use. The first phase of the scheme runs from 2005 to 2007.

The new data piles pressure on the Commission to take a tougher line when approving limits for phase two of the scheme, which runs from 2008-2012 and coincides with the period during which governments must meet greenhouse gas cuts pledged under the Kyoto Protocol.

European environmental non-governmental organisations (NGOs) say the current high allowances are reducing the credibility of the scheme. They are calling on the Commission and on member states to ensure that the total available pollution permits are significantly reduced for the second round of trading, to run from 2008 to 2012.

“Member states are now preparing their second phase National Allocation Plans. The European Commission must reject all those NAPs that do not show significant reductions compared to the previous allocation period,” said Kowalzig.

Member states must also make use of the auctioning possibility provided for in the ETS, he said. That would allow member states to auction up to 10 percent of the total number of permits, “rather than handing all of them out for free”, as in the first phase.

“In the long run, the ETS must be in line with the long-term needs to reduce emissions – that is, to ensure the participating sectors play their role in achieving a reduction of 30 percent of emissions by 2020, and 80 percent by 2050 compared to 1990 levels,” he said.

“The market can only become functional and create incentives for cleaner industries if the amount of allowances is set at a level which is in line with the Kyoto targets, allowing Europe to meet its international obligations. A loss of credibility of the EU emissions trading scheme will also undermine the credibility of the EU in the negotiations for new Kyoto targets after 2012,” added Stephan Singer, head of the European climate and energy unit at WWF.