EU industry profiting from wasteful emissions targets

by Stephen Hurrell. Published Thu 23 Jul 2009 13:39, Last updated: 2009-07-24
Energy companies are buying excess permits

Companies could make over £4.3 billion profits from the flawed European Union Emissions Trading System (ETS), claims a report by climate campaign group Sandbag.

The current ETS issues around two billion permits to industry with a cap on carbon emissions. Sandbag estimates the industry is issued with too many permits, causing nearly 400 million tonnes worth of surplus permits between 2008 and 2015.

The excess permits will then be sold on to energy companies for an estimated £4.3 billion, or stored to control the price of carbon in future.

The report states: “The scheme has the capacity to be a very powerful tool in cutting carbon emissions in the EU but it is currently a blunt tool, not delivering its full potential.”

The latest Intergovernmental Panel on Climate Change (IPCC) report indicates that developed countries should be aiming to reduce emissions by three percent a year, but the ETS is aiming for a six percent decrease in emissions over five years.

The quantity of permits issued by the ETS mean EU companies may not have to reduce any emissions for the next seven years to stay within EU targets.

The report warns that if the failings of the scheme are not resolved, a global deal at the Copenhagen conference in December will be under threat. Sandbag believes a deal will only be reached if the EU is displaying "significant effort and ambition in cutting its own emissions".

Sandbag is calling for immediate action to tighten the Emissions Trading Scheme caps so that emissions must be reduced 30 percent by 2020.

One of the report authors, Anna Pearson, said: “EU Emissions Trading Scheme covers a massive 50 percent of all EU carbon emissions that are produced by power companies and industry. And if the Emissions Trading Scheme isn't working properly to cut these emissions, the EU as a whole will fail to tackle climate change effectively.”

Sandbag Director Bryoni Worthington argued that companies in countries with strong 'polluting' industries like Germany, Spain and Sweden have shown great skill in lobbying member states for free allowances.

Worthington said the European Commission had most likely failed to notice the skewed distribution of free permits when it approved the National Allocation Plans due to lack of resources. "I believe that the Commission was caught up by clever member state submissions," she added.

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