Carbon Market Watch

For fair and effective climate protection.

Open letter to Members of the Committee on Industry, Research and Energy of the European Parliament on the revision of the EU ETS

03 Oct 2016

Open letter PDF (English)

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Dear Members of the European Parliament’s Committee on Industry, Research and Energy,

We, the undersigned, 4 networks and 22 organizations representing almost 50 million citizens across Europe, call on you to vote for an ambitious revision of the EU’s Emission Trading System (EU ETS) that supports a rapid phase out of fossil fuels, in particular coal.

The article 10c of the EU ETS Directive was designed to help countries most in need of transition help modernize and diversify their energy sources of supply. However instead the EU has approved a clear majority of the up to €12 billion through Article 10c for modernization and expansion of fossil fuel capacity in Central and Eastern Europe (CEE), including hard coal and lignite.[1]

As the EU has committed to phase out fossil fuel subsidies by 2020[2] and to achieve 80-95% emission cuts by 2050, the ETS cannot continue to subsidize unsustainable energy systems that will lock countries in coal dependency.

Instead the Modernization Fund and Article 10c should be used to shift investments in the region to energy efficiency and sustainable renewable energy sources.

The revision of the EU ETS provides a great opportunity to put a halt to coal subsidies. Consequently, we, the undersigned organisations, call on you to adopt amendments that:

  1. Deliver a meaningful carbon price to phase out coal. The current carbon price of below €5 is not high enough to incentivise the transition and promote investments in clean, low-carbon technologies. Instead it is sustaining long-lived coal infrastructure. The ETS cap must therefore be tightened to deliver a more meaningful carbon price which would phase out coal generation across Europe. Ultimately, power producers in all EU Member States should buy 100% of their allowances at auction.
  2. Exclude investments in both new and existing coal energy from Art 10c and the Modernisation Fund: Continuation of finance flows for coal capacity will not only increase dependence on coal power generation in CEE, but also have detrimental impacts on public health and the environment. The EU ETS revision offers a unique opportunity to end coal subsidies and use the Modernisation fund and Article 10c as tools that reduce energy poverty, and lower the import dependency of the beneficiary countries. These two mechanisms should be used for investments into sustainable renewable energy and energy saving technologies, while eliminating coal. Such investments will help decarbonise the economy, while maintaining the potential to create jobs in the construction sector and lead to significant health benefits. Expanding the provisions of Article 10c to make more countries (e.g. Greece) eligible for free pollution permits is not acceptable.
  3. Exclude investments in coal powered district heating and co-generation from Art. 10c and the Modernisation Fund: Under the current EU ETS directive, Article 10a(4)) already allows free allocation for district heating and high efficiency cogeneration. In fact, between 2013 and 2020, coal power plants have been allocated 179Mt of free permits for heat, with a value of minimum €1 billion. Allowing coal investments to district heating and co-generation under Modernization fund and Art 10c would multiply the free allocation for heating already available and could be used as a loophole to prolong the lifetime of combined heat and power (CHP) coal plants and increase money for burning coal.

[1] http://carbonmarketwatch.org/policy-brief-fossil-fuel-subsidies-from-europes-carbon-market/

[2] Decision 1386/2013/EU of the European Parliament and of the Council of 20 November 2013 on a General Union Environment Action Programme to 2020.