Europe’s emissions trading system lives to fight another day

Strasbourg, 15 December 2016. Today members on the European Parliament’s environment committee voted on the revision of the EU’s Emission’s Trading System (EU ETS). The vote enables faster cuts in Europe’s carbon pollution but falls short of putting a halt on free handouts to polluters.

The EU ETS is the world’s largest carbon market and Europe’s flagship policy instrument for reducing greenhouse gas emissions in power stations, large industrial plants and aircraft operators. The EU ETS directive is currently being revised to implement the EU’s 2030 climate target.

 A Paris-compatible EU ETS

 In a welcome move, members of the European Parliament (MEPs) today voted to remove one billion emission allowances and set deeper emission cuts. The adopted annual cuts of 2.4% (up from 2.2%) is the absolute minimum to align Europe’s carbon market with the EU’s 2050 climate objectives.

Agnes Brandt, senior EU climate policy officer at Carbon Market Watch: “While today’s vote makes the EU ETS more effective at cutting pollution, the system is still not in line with Europe’s international climate commitments. The ambition level of the EU ETS will need to be scaled up regularly to have any chance of limiting global warming to 1.5°C.

Presents to polluters

 Reflecting carbon costs in product prices is the objective of the EU ETS, but almost all industries can currently pollute for free. Policymakers proposed to continue this practice of rewarding polluters after 2020, despite evidence that industry have profited by over €25 billion.

 The only exception is the cement sector where a first step was taken to implement the polluter-pays principle by fixing the rules. In the future, the cement sector will no longer be entitled to receive free pollution permits and importers will also need to start paying for their pollution under an import inclusion scheme.

Agnes Brandt: “The cement sector has been free riding on the EU ETS for too long, with European citizens and low-carbon frontrunners footing the bill.  With this vote we have a positive signal from lawmakers that EU’s carbon market is finally moving away from subsidising Europe’s largest polluters.

 Contact:

Dr. Agnes Brandt – Senior EU Policy Officer

agnes.brandt@carbonmarketwatch.org

Tel: +32 483 22 75 71

Andrew Coiley – Communications Director

Andrew.coiley@carbonmarketwatch.org

Tel: +32 483 65 50 78

Notes to editors:

 The report by the EP’s environment committee is expected to be voted by the plenary in February 2017. On Monday 19 December, environment ministers will discuss the EU ETS revision but they are not expected to reach an agreement.

 The adopted report contains several industry pollution presents:

  1. Almost seven billion pollution permits could be given away for free in the next decade, representing €135 billion in lost incomes for governments[1].
  2. A fund to compensate industry’s use of fossil electricity (indirect carbon costs) will be established with almost 500 million allowances. This constitutes €9 billion being spent on subsidizing fossil fuel use, rather than supporting renewable power.

 Thanks to the overgenerous free allocation of pollution permits, the cement sector has made €5 billion in windfall profits from the EU ETS in the 2008-2015 period. In total, industries have made over €25 billion from the EU ETS according to analysts CE Delft.

Resources:

  • Cement briefing here
  • Windfall profit briefing here
  • CE Delft analysis here
  • ETS petition signed by almost 100,000 citizens here
  • Cement infographic here
[1] Assuming a carbon price of €20