http://www.guardian.co.uk/environment/2010/sep/10/eu-emissions-trading-savings/print EU emissions trading scheme on course to make tiny savings, says report Campaign group Sandbag calls for tighter caps on greenhouse gas emissions in Europe
Damian Carrington The Guardian, Friday 10 September 2010
The entire five-year period of the European Union's emissions trading scheme (ETS) that ends in 2012 is set to deliver carbon savings of less than a third of 1% of total emissions, according to a new report.
The analysis by emissions trading campaign group Sandbag predicts that only 32m tonnes of pollution permits will need to be surrendered to meet the cap on greenhouse gas emissions – a tiny fraction of the 1.9bn tonnes of carbon emissions covered by the ETS each year. The "miniscule" saving is the result of the economic crisis having driven down industrial activity while the caps remain at the same level.
"The ETS is the best thing we have but it is being held back by industry lobbying," said Sandbag's founder, Bryony Worthington. "We think the European commission wants to lower the caps but they need to win the political battle. As it stands, no one needs to do anything to curb their emissions until about 2016 – the ETS is locking Europe into a carbon trap rather than a carbon cap."
The report also finds that the number of "hot air" permits held by steel and cement manufacturers has risen sharply. These permits were awarded in anticipation of high levels of production, but since the recession has caused production to crash, the companies no longer need the permits. They can sell them on the open market or hoard them until the next ETS phase, when the carbon price may have risen. In 2009, the top 10 holders of surplus permits had 119m – four times the number of the previous year.
In Sandbag's projections, which assume an economic recovery and a return to 2008 levels of emissions in 2011, the biggest holder of hot air, steel-maker ArcelorMittal, will have amassed over 100m permits, worth over £1.5bn at today's price. The next three biggest in the list, Lafarge, Corus and Cemex, are predicted to have over 78m surplus permits between them by 2012.
"We do not know how many CO2 allowances we will end up with at the end of 2012 because it depends on the market developments in the next years," an ArcelorMittal spokesperson said. "In any event, we will not sell CO2 allowances we have received from governments as we will need them for future production needs or, alternatively, we will invest them in energy efficiency projects in our plants. Therefore, any surplus allowances we will have by end 2012 do not constitute a windfall profit."
A spokesperson for the Department for Energy and Climate Change (Decc) said: "We agree that in phase II of the EU ETS [2008-2012] the cap on European emissions is not tight enough, which is why under the revised EU ETS from 2013 there will be a much tighter cap."
However, Sandbag goes further, arguing that the 1.8bn permits likely to be carried over into the new phase in 2013 means carbon emissions could rise to a third higher than current levels, seriously undermining the attractiveness of investment in low-carbon technology.
One solution, said Sandbag, is to reset the caps based on the actual levels of carbon being emitted – not the levels predicted before the recession – and cancel hot air permits. Another, backed by Decc, is for the EU to increase its 2020 carbon reduction target from 20% to 30%, as it would have done at the Copenhagen climate change summit last year if other nations had made similar commitments.
"The coalition government is pushing the EU to demonstrate leadership in tackling international climate change, including an increase in the EU emission reduction target to 30% by 2020," said the Decc spokesperson. "This would lead to a significant tightening of the EU ETS cap, improve the way the EU ETS works and, in our view, substantially address many of the concerns raised by Sandbag."
Both industrial and steel lobby groups, Business Europe and Eurofer, have opposed changes to the ETS, saying it would put jobs at risk. In April, a UK steel company executive told the Guardian that a tighter ETS cap would be "death by a thousand cuts" for the industry.
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