EUETS will not drive abatement in phase 2

Even with a tight cap on emissions in the second phase, the EU emissions trading scheme (EUETS) will not lead to significant cuts in emissions by EU companies, delegates at ENDS’ second emissions trading conference heard at the end of January.

Dr Joachim Schleich of the Fraunhofer Institute in Germany compared the emissions caps in 23 national allocation plans (NAPs) with the verified emissions from the scheme’s first year and projected emissions in 2010.

Presenting his findings at the ENDS conference, he highlighted the differences between the 12 NAPs which have been amended by the European Commission (ENDS Report 383, pp 46-47 ), and the remaining 11 NAPs so far published which have yet to be assessed.

On average, the caps in the 11 to be assessed are only 2% lower than projected emissions in 2010, while the caps in the 12 amended NAPs are set around 12% lower than projected emissions

He told delegates that even with the tougher caps the EUETS will require only modest emissions reductions by installations in the second phase because member states and the Commission have not set a tight limit on the use of Kyoto credits.

The 11 NAPs yet to be assessed set caps around 42MtCO2 lower than business-as-usual emissions in 2010, but they propose to allow more than 300MtCO2, of Kyoto credits into the scheme, effectively requiring no emissions reductions by the industries covered.

The 12 NAPs amended by the Commission are more demanding. Their combined caps are 142MtCO2 lower than business as usual, but even here the Commission is proposing to allow more than 111MtCO2 of Kyoto credits. Thus 78% of the effort can be met by purchasing emissions reductions outside the EU.

"In the second phase, even if there is a similar judgment for the remaining plans, [installations] won’t need a lot of reductions," he said. "The incentives to reduce internally may be weakened."

Delegates with direct experience of the scheme said the low price of carbon in the first phase had not offered much incentive to cut emissions.

"Let’s be realistic and honest, the market was long in the first phase, so the EUETS has given no extra incentives for greenhouse gas reductions or changes to the fuel mix," said Philip Luyten, environment manager at Total Petrochemicals.

He said that the high cost of energy had been much more of a driver encouraging firms to cut emissions. However, he did reveal that many companies are now factoring a cost of carbon into future investment plans.

  • German Environment Minister Sigmar Gabriel has announced his country will accept the cap set by the Commission. The statement marks a u-turn by the German government which had threatened a court challenge (ENDS Report 384, p 12 ). The German decision leaves Slovakia isolated as the only member state considering an appeal against the Commission’s cuts.

    The price for allowances in the second phase remained stable at €14.60 on the news, but the price of current allowances continued to fall, reaching a new low of just €1.23 as ENDS went to press.

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