Carbon Market Watch Newsletter – March 2020

Europe’s recovery plans will fall flat unless they drive a green transition

Dear friends,

Up until only a few weeks ago, the climate emergency topped Europe’s political agenda. The European Commission published its much-awaited EU Climate Law, proposing to make Europe’s climate-neutrality target legally binding. Another key initiative was the launch of the new industrial strategy that is supposed to chart the path for a sustainable and competitive industry in Europe.

In parallel, the UN aviation agency ICAO’s decision-making Council took an important decision to limit (though not sufficiently) the supply of credits that airlines will be able to buy under the new aviation carbon market CORSIA.

Since then, Brussels has joined the about 20% of the global population currently on some degree of coronavirus lockdown. The pandemic has forced (climate) meetings to be cancelled or moved online and people to work from home in order to slow down the spread of the virus.

Some industries and governments are already using the health crisis as an excuse to weaken or scrap Europe’s climate policies. This is irresponsible and self-serving. Most European decision-makers though remain committed to the EU Green Deal and the climate policies needed to deliver it. These include the EU carbon market, which has seen its price plummet due to the corona-induced economic slowdown. The EU ETS will need to be significantly improved to handle a re-emergence of surplus emission allowances in the future.

The pandemic poses an unprecedented challenge that requires our governments’ full attention and immediate action. However, it would be extremely dangerous to allow it to derail efforts to stop the climate crisis. If anything, the current situation has shown that taking scientific advice seriously and acting early is key when it comes to protecting people in a crisis.

While emissions are temporarily going down as a result of reduced economic activity, this is not to be confused with climate action. Pollution is likely to bounce back once the pandemic is over. If coronavirus leads to governments propping up the biggest polluters and pushing the green transition aside, it can have disastrous climate consequences.

Therefore, it will be crucial to ensure that any financial stimulus packages drive the clean transition of our societies, and do not lock in dependence on fossil fuels. Furthermore, any industry bailouts need to be very carefully considered and come with strict conditions that mandate the sectors to reduce their pollution.

If we do this right, we can build cleaner, stronger and more resilient societies that are better equipped to weather similar storms in the future.

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