23rd Oct 2016


EU's flagship climate policy is sinking fast

  • The European Parliament refused to delay planned auctions of carbon allowances (Photo: European Parliament)

The Emissions Trading System (ETS) is the EU’s flagship climate policy and it is sinking fast. The stated aim is to put a price on carbon, providing a financial incentive for companies to cut their pollution and, ultimately, invest in cleaner energy sources and more efficient technologies.

For many reasons, it has not done so and the market in emissions allowances has crashed.

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The most recent proposal to re-float the scheme involved delaying (“backloading”) planned auctions of carbon allowances, making them temporarily more scarce in order to sure up carbon prices in the short term.

The European Parliament rejected this, with British Conservatives and centre-right MEPs from across the continent voting against the measure. Their stated aim was to avoid market “intervention,” but their scarcely concealed intent was to give European industry a free ride from climate obligations.

Conservatives are not alone in their objections. Increasing numbers of non-governmental organisations, and some left-of-centre MEPs are also calling for the ETS to be scrapped.

“The vote on backloading is the wrong debate,” according to Hannah Mowat from the Brussels-based NGO, Fern. “No amount of structural tinkering will get away from the fact that the EU has chosen the wrong tool to reduce emissions in Europe. It is inherently too weak to get the EU to where it needs to be in the necessary timescale.”

In short, it is no use reaching for some buckets when we should be heading for the lifeboats.

These criticisms face particular opprobrium from Green and Socialist MEPs and their allies who believe that the only realistic course is to “save” the ETS.

Opponents are treated as “useful idiots” playing right into the hands of those opposed to any climate legislation.

But eight years on, and several reforms later, the ETS is still failing to reduce emissions, and at the same time has even rewarded polluters with large subsidies. Why should we expect different results from doing the same thing over and over again?

Not the end of the story

Saying No to the ETS is not the end of the story. It is simply a way of refusing a forced choice, rejecting the terms of a debate that falls between rejecting legislation to address climate change and pursuing a policy that has been shown to achieve nothing.

We have already seen how “protecting” emissions trading has been used as an excuse to water down energy efficiency policies, which would be far more effective in reducing emissions.

Emissions trading also contradicts policies like feed-in tariffs which, when applied correctly, create far better price incentives to stimulate the uptake of renewable energy.

Scrapping the ETS does not mean that climate policy will fall into a vacuum.

Energy policy is largely controlled by member states rather than the EU itself, and there are important lessons to be shared at this level.

Germany’s Energy Transition (Energiewende) has seen the share of renewable energy rise from 6 to 25 percent over 10 years, with the biggest shifts driven by community and local investment rather than the energy multinationals.

This has not been driven by the ETS, but rather by a guarantee that renewables will gain access to electricity grids, providing certainty for investors.

At the EU level, the European Commission should re-focus on securing more ambitious climate targets now that “backloading” is dead in the water.

Removing the ability to circumvent domestic action by buying carbon offsets would help considerably with that goal. Ultimately, the EU needs to massively reduce its overall consumption of energy, including its outsourced emissions, which have continued to rise irrespective of emissions trading.

This does not require a single “flagship” policy to replace the ETS, so much as a sea-change in our thinking about how policymakers can help to address climate change.

The writer is an analyst at the Institute for Policy Studies in Washington and the co-author of a book on carbon trading


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