Call for EU carbon market overhaul as emission cuts slow down

Low carbon price and glut of free permits give power sector and industry little incentive to reduce their climate impact, say analysts

EU big emitters have a stockpile of free carbon permits (Pic: Marcel Oosterwijk/Flickr)

EU big emitters have a stockpile of free carbon permits (Pic: Marcel Oosterwijk/Flickr)

By Ed King

Calls for the European Union to revisit its energy and climate strategy are likely to intensify after new data suggests the decline in the region’s greenhouse gas emissions is slowing.

European Commission figures reveal emissions regulated under the bloc’s trading scheme in 2015 fell 0.4% from 2014 levels, compared to a 5% drop the previous year.

The emission trading scheme (ETS) covers 11,500 power and industrial plants accounting for around half of the region’s total emissions, including member states plus Iceland, Liechtenstein and Norway.

The latest data suggests member states may need to reassess the EU’s climate strategy if the trend is to continue, said Yan Qin, senior analyst at Thomson Reuters.

“The trend of declining emissions that has been in place since 2011 has now slowed down nearly to a halt.”

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The region’s sluggish economy expanded 1.7% in 2015, suggesting a minor break between emissions and economic growth.

“However, the EU still falls short of a significant absolute decoupling, which would occur if the EU could reduce emissions while growing its economy,” Qin added.

This week, the MEP tasked with reforming the EU’s carbon market offered a withering assessment of its effectiveness and aim to be a “driver of change”.

Last year heavy emitters received enough free carbon credits to cover 90% of emissions, in a market where 1.7 billion surplus allowances are now keeping credit prices to below €5 a tonne.

“It is currently cheaper to buy a cup of coffee and a bun than it is to purchase allowances that would permit you to emit a tonne of carbon into the atmosphere,” wrote Scottish lawmaker Ian Duncan.

“Clearly, something has to change, if the ETS is to be a driver of low carbon innovation within the industries that emit carbon.”

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Duncan and fellow MEPs plan to put reform proposals to the European Parliament’s environment committee in December, with a plenary vote in early 2017.

They are constrained by the European Commission’s assessment – waved through by heads of member states – that headline climate targets do not need to increase, despite last year’s UN deal urging countries to limit warming to well below 2C.

“It will be interesting to see how Parliament responds to this challenge,” said Duncan.

Dave Jones from campaign group Sandbag said structural flaws in the ETS needed to be resolved.

Designed to fall over time and throttle pollution levels, the ETS emissions cap was still too high to have any meaningful impact on industries, he said.

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