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April newsletter editorial: Panel debate on ETS comes straight from polluter’s pocket

Photo by FabioBalbi via Canva Pro

In a democratic debate, should everyone get an equal say or should those with money be given a soapbox and loudhailer? The answer to this question is obvious, yet it appears to have eluded Politico Europe, one of the main players on the Brussels media stage.

On 28 March 2022, Politico organised a virtual debate exploring the tensions surrounding the review of the EU’s Emissions Trading System. And tensions there were, not least over the sponsorship of the event, which made it far from democratic. By selling a fossil fuel company ‘partner’ status at the event, Politico allowed this important debate to be hijacked by the Polish Electricity Association (PKKE) and commandeered as part of its lobbying efforts.

The PKEE, whose members run coal-fired power stations and some even own coal mines, objects to every element of the proposed reforms of the EU ETS, while pretending to be committed to the EU’s target to reduce emissions by 55% by 2030. Despite PKEE’s clear vested interest, Politico gave it the first word in which it peddled the false claim that the ETS has fallen prey to speculators, which empirical evidence has repeatedly disproven. 

Luckily, the panel debate coincided with the final report of the European Security Markets Authority on the EU ETS, which did not uncover “any current major deficiencies in the functioning of the EU carbon market based on the available data”. More proof that PKEE, and other coal lobbyists, are fearmongering instead of engaging in a goodwill exercise to improve the ETS and reduce emissions.

PKEE also got to set the tone for the debate by being allowed to suggest the first question onto the audience.

Politico’s defence in the past has been that it maintains editorial independence over the composition of the panel and the questions asked. Yet even the announcement appeared to echo the concerns of polluters and ignore those of environmentalists. It only mentioned concern over the potential negative side effects of the ETS revision proposal and not, say, its positive effects. It also failed to mention civil society concerns that the reforms may not be enough to meet our climate goals.

I have boycotted a Politico event before when it was sponsored by Shell. However,  I decided to speak here rather than to allow the unacceptable bias to go unchallenged to the nearly 5,000 viewers who tuned in to watch. In that I support the spirit of the Fossil Free Politics campaign if not its call to decline all invitations to such events.

Steely determinations

The panel was also a good opportunity to take issue with another force standing in the way of ambitious ETS reform: the European Steel Industry Association, Eurofer. The steel industry boasts about having ambitious decarbonisation plans and Eurofer calls the steel industry “a world leader in innovation and environmental sustainability” – often as a preface in ETS debates to demand continued allocation of free emission allowances. But it has very little to show for its boast so far: a general plan to replace a quarter to a third of blast furnaces at the EU’s 25 steel installations by 2030, and a range of low CO2-projects nearly ready to roll out which would reduce the sector’s emissions by 30% by 2030 compared to 2018. This is equivalent to a 27% reduction compared to 2005, the baseline for the Commission’s proposal, which is -61% for the ETS sectors as a whole. A 27% reduction over 25 years, is a 1.1% reduction per year and  if 70% of emissions have to be reduced after 2030, at the same pace it would take the steel sector almost until 2100 to decarbonise.

After receiving free emission allowances for almost 15 years without the decarbonisation to show for it, the steel industry continues to sing from the same old hymn sheet, that it needs pollution subsidies in order to be able to invest. Heavy industries hate to be reminded that they have collectively received about €200 billion in pollution permits for free and made up to €50 billion in profits from the ETS between 2008 and 2019 while their emissions have stagnated since 2012. Yet we are being told that investment in the next decade depends on industry continuing to receive free pollution permits. What would guarantee that free allocation leads to investment in the next 15 years?

Industry has to stop defending the anachronism which the free allocation of pollution permits is and accept that the polluter must pay for their pollution so that the investments in change actually happens. Instead of demanding protection from theoretical carbon leakage, industry must put in focus the support it needs to decarbonise. If the 5 billion allowances currently earmarked for free allocation this decade were auctioned, this could generate revenues of €300 billion for investment in climate solutions, including in the steel sector. This could then help the steel sector break the mould and become a world leader in climate friendly production.

As our briefing on decarbonising steel explains, at the very least, the steel industry should not stand in the way of reform of the benchmarks which are used to determine the level of free allocation that each installation receives under the EU ETS. ETS benchmarks are designed to decrease over time, but the pace at which benchmarks improve is extremely slow and provides little incentive for industrial sectors to reduce their emissions. Eurofer opposes changing this. Those steelmakers that have invested in low- or zero-carbon techniques are being undermined by a benchmark system that continues to subsidise pollution. By receiving free allowances, heavy polluters are receiving an unfair competitive advantage over their cleaner competitors. Eurofer defends this perverse status quo.

The current energy price crunch, in combination with the invasion of Ukraine, provides a convenient context for the likes of PKEE and Eurofer to try and convince policymakers and the public that we can’t afford the energy transition. In reality, what we can’t afford is to continue wrecking the climate, and the geopolitical instability that fossil fuel dependency creates. And the ETS reform is not about making it fit for this year or next year but for the make-or-break decade ahead of us.

The key to lowering our energy bills is to accelerate the rollout of renewables, boost energy efficiency and save energy. To achieve this, we need a healthy democratic debate free of distorting vested interests.

Thank you for reading and enjoy the articles in this newsletter.


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