Seminar 01Emission

Emission Trading in the EU

EU Climate Change Strategy.

By Rob Bradley, Climate Network Europe

Who is Climate Network Europe?

• We focus on climate change
• 83 European Members
• More than 300 members of the Climate Action Network (CAN)
• Necessary global perspective
• CAN a major player at Kyoto

The EU as the home of emission trading?
EU can set the rules, but domestic trading is VERY different from Kyoto trading.

Why consider emissions trading?

• Sets a CAP on total emission from the sectors covered
• Certainty of environmental outcome
• Trading helps allocate effort between countries, increasing equity
• Helps reduce costs, making deeper cuts more politically acceptable
• Encourages innovation – pushes further than best available techniques

EU emission trading is not the same as Kyoto emission trading!

• Kyoto trading incorporates hot air due to silly target-setting
• Compliance is essential to a credible trading system – we have the ECJ!
• EU trading will be for companies – easier to prosecute
• Few international equity issues

About the Commission proposal

• “Downstream” trading system
• Direct emissions only
• Sectors limited to large point sources (industrial)
• Chemical sector partly excluded
• CO2 only

What has happened to it?

• Proposal was blocked in interservice consultation
• Blockers were DG ENTR, Germany Ministry of Economics and BDI
• Proposal to reappear before COP7
• Part of overall implementation package

Key issues for NGOs

• Mandatory or voluntary?
• Sectors covered and targets
• Compliance system
• Allocation methodology
• Project mechanisms

Mandatory or voluntary?

• Industry arguing for voluntary system
• “Pilot phase” 2005-7 ?
• Would a voluntary system have buyers?
• What other policies would then be necessary?
• What kind of voluntary? Companies? Sectors? Countries?

Sectors to be covered

• Commission envisages just key industry sectors – large point sources
• Just CO2, perhaps other gases later
• Chemical sector direct CO2 emissions out
• Possible that countries could “opt in” other sectors, but still unclear

Compliance

• €50 per tonne CO2 over-emission
• Amount less important than the fact that it makes non-compliance stupid
• Vital therefore that ET applies to companies directly
• Penalty must be automatic
• Proposed Directive strong on this

Allocation methodology

• Auctioning vs. Grandfathering
• Hybrids are possible
• Principle of reward for early action/ penalty for late
• Methodology to be decided at EU or member state level?
• Not critical for environmental outcome

Project mechanisms

• Current proposal does not include project mechanisms
• Industry very strongly advocates inclusion
• NGOs demand higher environmental standards than under the Kyoto Protocol

What now for NGOs?

• Awareness raising on ET and its key characteristics
• Need to define “crunch issues” that could devalue ET
• Need a feel for trade-offs with other policies and measures, e.g. taxes

Read Climate Network Europe's policy papers