Carbon market ‘hot air’ undermining EU’s climate strategy

NEWS: carbon credit surplus hindering Europe’s emissions trading scheme from operating effectively, say analysts


By Ed King

Billions of excess carbon allowances are undermining Europe’s emissions trading scheme and its efforts to address climate change.

That’s the finding of the Sandbag Climate Campaign, a London-based NGO which has calculated that over 2 billion excess carbon credits are now floating around the EU-ETS, driving down prices and reducing penalties for carbon polluters.

Sluggish economic growth in the EU means demand for allowances is low, with 2013 verified emissions falling below the EU’s annual ‘cap’ for the fifth consecutive year.

Without any Europe-wide efforts to cancel these outstanding permits, Sandbag’s head of policy Damian Morris says they are likely to accumulate until 2020.

“As the world’s climate scientists call for an ‘age of climate responsibility’, Europe’s climate efforts could be sabotaged for decades by the mountain of spare carbon allowances that have accumulated in its Emissions Trading System,” Morris said.

“If Europe is to deliver on its responsibilities and fix the broken ETS, EU policymakers urgently need to cancel this growing surplus and agree ambitious new climate targets for 2030.”

The EU has authorised plans to hold back some permits until the end of the decade, knock as ‘backloading’, but this will only come into effect this year.

The warning comes on the day the EU published its 2013 greenhouse gas emissions data which revealed companies emitted around 3.1% less carbon dioxide compared to 2012.

Analysts at Thomson Reuters Point Carbon say power and heat emissions from the 28 countries taking part in the EU ETS fell 4.7% last year.

“This is the largest drop in power emissions since the 2008 financial crisis; driven largely by a slump in power consumption,” said Point Carbon’s Yan Qin in a statement.

EU carbon prices fell to a nine-month low at the end of last week, as traders anticipated today’s release of EU emissions data would indicate the surplus was rising.

Official say they are now exploring further options to boost the market, which is the largest in the world.

“Repairing the ETS is more urgent than some thought … We can see why there is the urge for the rapid adoption of EC proposals from January,” Platts reported Niels Ladefoged from the European Commission’s Climate Action division saying earlier on Tuesday.

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