Brussels, 15/05/2006 (Agence Europe) - Carbon dioxide emissions (CO2) produced by industrial installations in 21 Member States of the EU were more than a million times less in 2005 than the levels allocated them in the European emissions exchange market. Good news for the fight against climate change? This is far from being the case if it turns out that this result is due to excessive quota allocations being made.
This indeed appears to be the trend observed in the first report on CO2 emissions statistics during its initial phase (2005-07) published by the European Commission on Monday. This report analyses the data provided by the 21 Member States that met the obligation they made to send out figures for 30 April at the latest (data is still needed from Luxembourg, Malta, Cyprus and Poland an which are infringing Community law by not having set up national registers). The report illustrates that these 21 Member States allocated a “permit to pollute” of an average annual amount of 1.8 billion tonnes to the 9420 industrial units that not used up these quotas fully, given that they emissions levels only reached 1.7853 billion tonnes of CO2 (an emissions level that was duly verified). These countries also set aside an annual average of around 73.4 million in permits for allocating to new installations or for trading in. Some shortcomings were identified in the registration of emissions in France, Czech Republic, Slovakia and in Spain, who are also requesting more precise studies to be carried out.
In terms of emissions volumes, the first partial balance sheet of actual emissions from companies taking part in this system, operational since 1 January 2005, is on first impressions, encouraging. It would, however, be risky to reach any hasty interpretations on the efforts made to fight climate change. Several reasons to this effect explain this situation. In the best scenario, countries effectively succeeded in reducing their emissions (Germany, for example, made a reduction of 9 million tonnes of CO2). But other factors could have played a role, such as spectacular increase in energy prices leading to more cautious energy use, the fact that winter 2005 was not as cold as the winter in 2006 and abundant rainfall in certain countries led to increased use of hydraulic energy. The too generous allocation of quotas by Member States cannot be ruled out either. But the Commission, at this state is not making any comment on the possibility of over-generous allocations being made. A source close to the Commission stated, “any talk of over-allocations is premature. We will be carrying out checks. Things need examining in every installation to reach a conclusion on the trend. Member States are currently preparing their second quota allocation plan for 2008-12. They will be able to do this on the basis of this data”. These plans have to be presented to the Commission by June, which will then have two months to reach a decision on the matter.
Environmental NGOs sound the alarm
Environmental NGOs believe there is no doubt: under-use of quotas is the reflection of too much leniency being shown by Member States towards their industries. In a joint press release, the WWF, Climate Action Network (CAN), Friends of the Earth Europe and Greenpeace accused European governments of allowing their industries to produce as much carbon dioxide as they wanted at no cost. Matthias Duwe, Director of CAN Europe affirmed, “European governments have blatantly ignored the aims behind the ETS and abused the trading scheme, under pressure from their dirty industries…Governments need to grab control of the wheel and steer a clear path to emission reductions”.
Stephan Singer, Director of the Climate change and Energy Unit at the WWF said that given the credibility of the system, “The market can only become functional and create incentives for cleaner industries if the amount of allowances is set at a level which is in line with the Kyoto targets, allowing Europe to meet international obligations…A loss of credibility of the EU Emissions Trading System will also undermine the credibility of the EU in the negotiations for new Kyoto targets after 2012”.
It is worth noting that the Community system of trading in emissions quotas includes the anticipated implementation of one of the flexible mechanisms of the Kyoto Protocol. It allows installations which consume large amounts of energy (electrical installations, the glass, paper and cement industries, and others) which have exceeded their emissions quota to buy extra from other installations which use less energy, which may sell their unused quota on the European CO2 market, where the price is established according to the law of supply and demand. Each installation taking part in the system is granted an annual quota from its government, along with the obligation to report back on its real emissions, at the end of every calendar year, and to guarantee that it sends the national competent authority independently verified data by 31 March.