EU emission trading scheme faces revolt in Eastern Europe
The EU's Emission Trading Scheme is facing a revolt by Eastern European countries who claim their carbon allowances, set by the Commission, are too low. Six member states are considering taking legal action against the executive branch of the Union. If they win, the European carbon market and the scheme to make it work would end up in ruins.
The European Union Greenhouse Gas Emission Trading Scheme (EU ETS) is a unique instrument aimed at reducing carbon dioxide emissions from industry. Put in simple terms, the system works on the basis of national allocation plans, which set the amount of carbon dioxide a country's industry is allowed to emit and which determines the basis of the market price for carbon. Some 12,000 large industrial plants in the EU are then able to buy and sell permits to release carbon dioxide into the atmosphere. The EU ETS enables companies exceeding individual CO2 emissions targets to buy allowances from 'greener' ones and thus help reach the EU targets under the Kyoto Protocol. The national cap is calculated by the member state, but the Commission makes its own assessment of the proposal and if necessary corrects it, downwards.
Even though analysts see the ETS as a model scheme for tackling climate change (previous post), the first trading phase, which ran from 2005 to 2007, completely failed because allocations were set way too high. Some say these over-allocations were the result of governments succumbing to industrial lobbies. In any case, the excess led to a crash of the price of carbon and with it the incentive for industry to invest in cleaner technologies.
Revolt in Eastern Europe
A repeat of that scenario during the second phase (2008-2012) is now looming. Latvia is the latest country to join Poland, Hungary, the Czech Republic, Slovakia and Estonia in challenging the trading scheme, after the Commission ordered [*.pdf] it to lower its proposed cap to 3.43 million tonnes annually rather than the 6.25 million it had asked for.
The Eastern European countries are arguing that the strict limits imposed by the EU executive are too low and will hurt their economies at a time when they are still playing catch-up to the rest of the Union. Latvian Prime Minister Aigars Kalvitis announced his government's decision to take the Commission to the European Court of Justice to fight the cap:
energy :: sustainability :: climate change :: greenhouse gas emissions :: carbon market :: Emission Trading Scheme :: European Union ::
But the Commission appeared undaunted. "We are confident that our decisions that have been challenged will stand up in court", said environment spokeswoman Barbara Helfferich, insisting that the Commission had "applied the rules fairly" and had not "discriminated in any way".
Decisions in the six cases could take up to two years, but if the Commission does lose and has to increase member states' CO2 allowances, experts predict it would throw the entire carbon market out of balance.
The first phase of the EU's ETS, from 2005 to 2007, was already seriously undermined because governments grossly over-estimated the amount of pollution credits required by their industries. This vast over-allocation sent carbon prices crashing, and a repeat scenario is feared if the countries win their case.
The legal battle highlights growing tension in the EU over the sacrifices needed to fight climate change ahead of a tough debate between governments, due this autumn, over how the 27 member states should share out the burden of cutting CO2 emissions by 20% by 2020 – a target agreed by EU leaders at the March European Council.
References:
European Commission: EU ETS website.
European Commission: Webpage on national allocation plans.
EU ETS: Questions & Answers on Emissions Trading and National Allocation Plans.
European Commission: Emissions trading: Commission adopts decisions on amendments to five national allocation plans for 2008-2012 - July 13, 2007.
Euractiv: EU Emission Trading Scheme, link dossier (permanently updated).
Biopact: Review of EU Emissions Trading Scheme finds it to be successful, key to climate change policy - June 01, 2007
Biopact: European utilities fail to reduce emissions - report - November 24, 2006
Biopact: The 'obscenity' of carbon trading - November 11, 2006
The European Union Greenhouse Gas Emission Trading Scheme (EU ETS) is a unique instrument aimed at reducing carbon dioxide emissions from industry. Put in simple terms, the system works on the basis of national allocation plans, which set the amount of carbon dioxide a country's industry is allowed to emit and which determines the basis of the market price for carbon. Some 12,000 large industrial plants in the EU are then able to buy and sell permits to release carbon dioxide into the atmosphere. The EU ETS enables companies exceeding individual CO2 emissions targets to buy allowances from 'greener' ones and thus help reach the EU targets under the Kyoto Protocol. The national cap is calculated by the member state, but the Commission makes its own assessment of the proposal and if necessary corrects it, downwards.
Even though analysts see the ETS as a model scheme for tackling climate change (previous post), the first trading phase, which ran from 2005 to 2007, completely failed because allocations were set way too high. Some say these over-allocations were the result of governments succumbing to industrial lobbies. In any case, the excess led to a crash of the price of carbon and with it the incentive for industry to invest in cleaner technologies.
Revolt in Eastern Europe
A repeat of that scenario during the second phase (2008-2012) is now looming. Latvia is the latest country to join Poland, Hungary, the Czech Republic, Slovakia and Estonia in challenging the trading scheme, after the Commission ordered [*.pdf] it to lower its proposed cap to 3.43 million tonnes annually rather than the 6.25 million it had asked for.
The Eastern European countries are arguing that the strict limits imposed by the EU executive are too low and will hurt their economies at a time when they are still playing catch-up to the rest of the Union. Latvian Prime Minister Aigars Kalvitis announced his government's decision to take the Commission to the European Court of Justice to fight the cap:
energy :: sustainability :: climate change :: greenhouse gas emissions :: carbon market :: Emission Trading Scheme :: European Union ::
But the Commission appeared undaunted. "We are confident that our decisions that have been challenged will stand up in court", said environment spokeswoman Barbara Helfferich, insisting that the Commission had "applied the rules fairly" and had not "discriminated in any way".
Decisions in the six cases could take up to two years, but if the Commission does lose and has to increase member states' CO2 allowances, experts predict it would throw the entire carbon market out of balance.
The first phase of the EU's ETS, from 2005 to 2007, was already seriously undermined because governments grossly over-estimated the amount of pollution credits required by their industries. This vast over-allocation sent carbon prices crashing, and a repeat scenario is feared if the countries win their case.
The legal battle highlights growing tension in the EU over the sacrifices needed to fight climate change ahead of a tough debate between governments, due this autumn, over how the 27 member states should share out the burden of cutting CO2 emissions by 20% by 2020 – a target agreed by EU leaders at the March European Council.
References:
European Commission: EU ETS website.
European Commission: Webpage on national allocation plans.
EU ETS: Questions & Answers on Emissions Trading and National Allocation Plans.
European Commission: Emissions trading: Commission adopts decisions on amendments to five national allocation plans for 2008-2012 - July 13, 2007.
Euractiv: EU Emission Trading Scheme, link dossier (permanently updated).
Biopact: Review of EU Emissions Trading Scheme finds it to be successful, key to climate change policy - June 01, 2007
Biopact: European utilities fail to reduce emissions - report - November 24, 2006
Biopact: The 'obscenity' of carbon trading - November 11, 2006
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