As a result of the European Union’s Emissions Trading Scheme (EU ETS), some member states are importing more and more electricity from coal-fired power plants in neighbouring countries of the EU, thereby relocating their carbon emissions, a new report by Sandbag, published on Wednesday 29 January, warns.
For this think-tank specialising in climate issues, carbon leakage “will undermine EU emissions cuts, as well as incentivising further use of coal in neighbouring countries, turning them into ‘offshore carbon havens’”.
According to the report, net electricity imports increased from 3 TWh in 2017 to 21 TWh in 2019. All imports come from countries with zero or near-zero carbon pricing, such as Turkey, Ukraine, Morocco and the Western Balkans.
While imported electricity emitted 26 million tonnes of CO2, producing the same amount of electricity in the EU’s importing Member States would have resulted in 11 million tonnes less, because their electricity grids emit less carbon on average, the paper also says.
In addition to increasing CO2 emissions, this carbon leakage represents a loss of revenue for the EU. If they had been covered by the ETS, gross electricity imports in 2019 would have generated revenues of €630 million.
In addition, the report fears that this increase in imports of “duty-free electricity” from coal will increase in the future, in the absence of adequate measures at EU level.
“Plans exist to increase interconnection capacity between EU and non-EU countries by 31%, further exposing EU power markets to imports”, the reports authors are concerned. It also added, “15% of this expansion is with the Western Balkans, home to Europe’s most polluting power stations”.
The report also indicates that new coal-fired power plants – with a capacity of up to 57 GW – are planned or already under construction in countries connected or soon to be connected to the EU electricity grids. This is the case in Turkey (34 GW), Egypt (11 GW), Bosnia and Herzegovina (4 GW) and Serbia (2 GW).
In view of all this, Sandbag calls on the EU to apply a carbon price on electricity imports.
According to this think tank, a border carbon adjustment mechanism (BCA) applied to electricity would have two major advantages. This would not only defend the integrity of EU climate policy by preventing the delocalisation of emissions from the power sector, but would also provide an incentive for neighbouring states to decarbonise and/or align their climate policies, thereby accelerating the spread of carbon pricing.
Furthermore, Sandbag believes that such a mechanism would be easier to set up in the case of electricity than for other products, as the transparent electricity flows and the relatively simple production chain make it possible to track carbon emissions.
To view the report: https://bit.ly/2ObA7Nv (Original version in French by Damien Genicot)