Brussels, 06/11/2012 (Agence Europe) - European countries could increase revenues from a strengthened EU carbon market by more than €60 billion between 2013 and 2020, according to a report released on Tuesday 6 November and commissioned by Greenpeace and WWF. The report, “The Cost of Inaction” , adds grist to the mill of supporters of carbon market reform, as proposed by the European Commission on 25 July. This seeks to allow carbon prices to act as an incentive to investment in clean technologies (EUROPE 10663).
Based on modelling by the German-based Öko-Insitut, the report shows that temporarily withholding emission allowances - a step known as “backloading” - would increase carbon market revenues by 7% or €7 billion between 2013 and 2020, compared to a scenario without intervention. In addition, the report finds that with carbon market measures delivering 25 to 30% greenhouse gas emission reductions by 2020 (compared to 1990 levels), auctioning revenues would increase between 73 and 91% (€62 - €78 billion). This would enable several EU member states, including Germany and Latvia, to use ETS auctioning revenues for supporting innovation and green technology.
A 30% emissions reduction target would involve the withholding of 2.7 billion quotas during the next ETS exchange period. The WWF and Greenpeace jointly support backloading as an important temporary solution to fix the ETS and call on the EU to withhold at least 1.4 billion emission allowances. Sam Van den Plas, Climate Policy Officer at WWF European Policy Office said, “Without a stronger carbon market EU governments lose the opportunity to send an economically efficient price signal to Europe's biggest climate polluters. What the EU needs is a combination of emergency and structural measures to fix its carbon market. EU governments need to smartly invest the auctioning revenues in cleaner and more competitive production”. Joris den Blanken, Greenpeace Climate Policy Director, drove the message home by explaining that “despite Europe's carbon market, coal burning is on a record-high. The carbon market is not working and EU leaders need to fix it before it becomes irrelevant. This report demonstrates that a functioning carbon market can bring huge financial benefits without harming European industry”.
The report also demonstrates that the effects of ETS intervention on the competitiveness of European industries - such as steel and cement - are negligible, as many sectors exposed to a significant risk of carbon leakage continue to benefit from free emission allowances under the ETS directive for 2013-2020. The report criticises the Commission's 2009 assessment of the ETS directive's impact on the competitiveness of the high carbon industry, arguing that it is based on outdated parameters.
The results of the impact study into three possible options envisaged by the European Commission for the short-term reform of the carbon market (withholding in 2013 of 400, 900 or 1 200 million de tonnes of CO2 respectively, which would be put back on the market in 2015) is expected out on 14 November. The Commission hopes that this measure will be agreed in principle by the climate change committee (committee procedures). The formal decision will be made when the required legislative amendment has been approved by the Council and the Parliament at the end of the year (as hoped by the Commission), which would send out a message to the markets at the beginning of 2013.
The long-term draft reform on ETS focuses on more structural measures (permanent freeze of quotas, including other sectors in the ETS or a more linear reduction strategy) and is due out at the end of the year. (AN/trans/fl)