Brussels - The European Union trading scheme of greenhouse emissions is in trouble, as preparation for a tough fight with E.U. member states to force them to uphold the credibility of the program.
Experts are urging the European Commission to clamp down on member states that set lax CO2 emission targets, as the first part of the scheme has shown over-generous allocations of "permits to pollute".
The market is being accused of generating billions of Euros in profits for utilities at the expense of consumers.
The market was established through the first mandatory emissions trading scheme, under which E.U. businesses in certain energy sectors are issued permits for the amount of carbon dioxide they may emit. Those sectors which need more than their allowance have to buy spare permits from businesses that have reduced emissions, thereby creating a market in carbon permits.
But the market was undermined from the beginning by weak willed governments.
In April and May this year, the whole scheme was thrown into chaos after it was known that the E.U. governments had given more permits out than companies in the different sector needed in order to be able to cover their emissions from January first 2005 until the end of 2007.
Things became somewhat relaxed after the European Commission had pointed out this is only the first part of the scheme and the second part from 2008 to 2012 will have tougher targets.
But the indications today for the second part of the scheme are not very promising.
Most of the E.U. member states missed the deadline for the draft proposals on the number of allowances that they would issue to their businesses.
Furthermore, some of the proposals by the member states for the second part show only little reduction of the number of allowances.
According to the European Commission calculations, E.U. member states will have to cut the number of allowances by about six percent in the second part, so they can meet their obligations under the Kyoto protocol on climate change that must be met by 2012.
The cap in the first part was 100-million tonnes more than actual emissions in the first part of the scheme and the European Commission's authority is at stake. Should the European Commission fail to clamp down on the member states and insist on more stringent CO2 reductions, the second part is doomed to fail.
Overall, 130-million tonnes of carbon need to be cut from national plans that have been submitted until now.
Beyond the European Union, the carbon trading under the Kyoto protocol is healthy. The developed countries must reduce their emissions by five percent by the year 2012, according to the terms of the treaty and can do so by investing in projects, such as wind farms or solar panels, that add to the reduction in developing countries.
Next year, the Kyoto mechanism will face a big test, when an electronic register will have to be set up that will allow carbon trading between countries that ratify the Kyoto treaty.
Should there be no rigorous plans by the E.U. governments, the Emissions Trading System (ETS) will be exposed to more criticism that the scheme is not only a failure but also a license for polluters to exhort money from consumers.
Israel Rafalovich
Please also see:
WUPPERTAL INSTITUT http://www.wupperinst.org
United Nations Framework Convention on Climate Change
http://unfccc.int/2860.php
and in our Links section.
Experts are urging the European Commission to clamp down on member states that set lax CO2 emission targets, as the first part of the scheme has shown over-generous allocations of "permits to pollute".
The market is being accused of generating billions of Euros in profits for utilities at the expense of consumers.
The market was established through the first mandatory emissions trading scheme, under which E.U. businesses in certain energy sectors are issued permits for the amount of carbon dioxide they may emit. Those sectors which need more than their allowance have to buy spare permits from businesses that have reduced emissions, thereby creating a market in carbon permits.
But the market was undermined from the beginning by weak willed governments.
In April and May this year, the whole scheme was thrown into chaos after it was known that the E.U. governments had given more permits out than companies in the different sector needed in order to be able to cover their emissions from January first 2005 until the end of 2007.
Things became somewhat relaxed after the European Commission had pointed out this is only the first part of the scheme and the second part from 2008 to 2012 will have tougher targets.
But the indications today for the second part of the scheme are not very promising.
Most of the E.U. member states missed the deadline for the draft proposals on the number of allowances that they would issue to their businesses.
Furthermore, some of the proposals by the member states for the second part show only little reduction of the number of allowances.
According to the European Commission calculations, E.U. member states will have to cut the number of allowances by about six percent in the second part, so they can meet their obligations under the Kyoto protocol on climate change that must be met by 2012.
The cap in the first part was 100-million tonnes more than actual emissions in the first part of the scheme and the European Commission's authority is at stake. Should the European Commission fail to clamp down on the member states and insist on more stringent CO2 reductions, the second part is doomed to fail.
Overall, 130-million tonnes of carbon need to be cut from national plans that have been submitted until now.
Beyond the European Union, the carbon trading under the Kyoto protocol is healthy. The developed countries must reduce their emissions by five percent by the year 2012, according to the terms of the treaty and can do so by investing in projects, such as wind farms or solar panels, that add to the reduction in developing countries.
Next year, the Kyoto mechanism will face a big test, when an electronic register will have to be set up that will allow carbon trading between countries that ratify the Kyoto treaty.
Should there be no rigorous plans by the E.U. governments, the Emissions Trading System (ETS) will be exposed to more criticism that the scheme is not only a failure but also a license for polluters to exhort money from consumers.
Israel Rafalovich
Please also see:
WUPPERTAL INSTITUT http://www.wupperinst.org
United Nations Framework Convention on Climate Change
http://unfccc.int/2860.php
and in our Links section.