As the signs of climate breakdown become unmissable, we must not sacrifice our carbon ambitions in favour of damaging short-term fixes. We must tackle the energy crunch in a way that is compatible with our climate goals.

During the summer break, many of us observed signs of climate breakdown. I cycled about 500 km, many along parched fields with crippled crops. A colleague of mine witnessed forest fires first hand. I’m sure we are not alone. Yet efforts to halt climate change and pass ambitious legislation have been sapped of their political juice along with the drought. The energy price crunch and how to alleviate it so we get through the next winter without rising poverty and social unrest has sucked up political attention instead. The prospects for an ambitious reform of the EU’s Emissions Trading System following the current trilogues between the EU institutions are not propitious. 

EU member states have thrown about ideas and preferences for tackling the energy crunch. The European Commission has already responded with its five preference measures. The Czech Presidency will try and steer the Council to an agreement in its meeting this Friday 9 September. The more extreme  – and opportunist – suggestions of an ETS suspension or an ETS price cap have so far been rebuffed by the European Commission, but its previous RePowerEU proposal does not bode well for the ETS: creating space for more carbon pollution  would be a significant, detrimental, side effect of releasing allowances from the Market Stability Reserve, which is meant to keep the supply of pollution permits in check. The questions how to finance state aid and social subsidies in the current situation is better answered by taxing the record profits of fossil fuel companies.

The European Parliament and the Council formulated their ETS positions under the influence of energy price shocks. The trilogues will happen under the influence of overall cost of living increases and inflation. Still, there is no good, intrinsic reason to go about ETS reform as if its results would already play out this winter. The EU’s keystone climate policy must not be revised to fit the current mood, but rather to make us fit for our 2030 emission reduction goal. The ETS review must be urgently decoupled from tackling the energy crunch. May the postponement of the trilogues to October help. 

Powerful incentive

We might have another summer experience in common: pondering (further) personal energy savings measures for this winter. One positive aspect of the current crisis is that the high cost of energy does encourage changes in behaviour. A decline in energy consumption is the most important step to reducing emissions and our dependence on fossil fuel imports, so EU governments should be careful with considering price caps and focus instead on supporting those households which suffer intolerable hardships and those businesses which would go bankrupt despite having a place in a green economy or which would generate an enormous social fallout if they did.

Ironically, what ETS prices have so far not achieved for the decarbonisation of heavy industry in particular, might be advanced through the current energy price crunch. Of course, industrial transformation is not brought about through imposing a cost on pollution (or through high energy costs) alone. Innovation comes from investment and money for that can be generated from ETS revenues. The answer to the current situation must entail measures for structural change which future-proof our economies. And let’s keep in mind the carbon price is a neglegible component of rising energy prices, the threat of industrial relocation and ‘carbon leakage’ deserves our scepticism because fossil gas is currently the real driver of increasing costs for industrial sectors. 

The ETS trilogues and other interesting topics are certainly keeping us busy and the summer is starting to feel like a distant memory. 

In this edition of the newsletter, we explore the need for a coordinated EU position on carbon removals, the latest developments related to the Paris Agreement’s Article 6, and our guest articles arguing against fossil gas in the Modernisation Fund and examining alternatives to the ETS for industrial decarbonisation. Last but not least, share our excitement about our renewed visual identity – in the spirit of true sustainability, we have recycled old elements, kept the underlying technology, and done as much as possible ourselves.

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The contents of this month’s newsletter can be viewed here.