CO2 trading targets too generous, say environmentalists

CO2 trading targets too generous, say environmentalists
Published: 05 January 2005

The European Union is at the centre of a new row between governments, industry and environmental campaigners over its ambitious new CO 2 emissions trading scheme, which came into effect on January 1. It is designed to help the 25 members meet their commitment to an 8% cut in greenhouse gas emissions by 2012 under the Kyoto protocol (reports the UK Guardian newspaper).

Just before Christmas the European commission announced that, even without the new carbon emissions market, the EU 15 - the original members before 10 new countries joined in May - will surpass their Kyoto targets. hey are said to be on track to achieve an 8.6% reduction by 2010, compared with a cut of 2.9% (from 1990 levels) by 2002. This is partly because EU states such as France and the Netherlands plan to use the protocol’s mechanisms for investing in emissions-savings projects overseas, including in developing countries, which are not bound by Kyoto.

 But this optimistic forecast, prepared by the European environment agency, has been ridiculed by campaigners such as the WWF, the conservation body, which claims that all EU countries have been over-generous in distributing emission allowances in national allocation plans under the new scheme - mainly because of intensive industry lobbying.

 About 12,000 large industrial plants, including power stations and energy-intensive sectors such as steel, aluminium, cement and oil and gas refineries, are covered by the new market, which is said to have seen 1Mt of carbon a week traded in the run-up to its formal entry on January 1 in 21 states. The first phase of the plan runs from 2005 to 2007.

There are fears that, because of governments’ over-generosity, the market price will be too low - perhaps as little as €8 (£5.65) a tonne - to effect a genuine cut in emissions and, moreover, other polluting sectors will wreck the achievement of the Kyoto targets. Conversely, industry fears that electricity prices will rise by at least 5%, squeezing them further in a weak macro-economic environment. According to the WWF, Germany, Britain, Portugal, Denmark, Austria, the Netherlands, Belgium, Finland, Ireland, Italy and France have given industry a "free ride" by handing out excessive emission allowances and are inflating the carbon market.

The 10 new EU members, mainly east European, have already cut CO2 emissions by 9%, largely because of the collapse of heavily polluting industries in new market conditions, and are on track to go further, even though they, too, are said by the WWF to have been over-generous.

Oliver Rapf, of WWF Europe, insists that there are few incentives for industries to cut emissions. "The EU needs to address the shortfalls of the current system to ensure higher CO2 cuts in the second phase, from 2008 to 2012," he says. Another worry is that the EU has underestimated how much emissions are rising now. The consultants KPMG recently calculated that those in the electricity sector rose by 23% in 2003. Even Brussels has conceded that emissions in transport, mainly from cars and trucks, were 22% higher in 2002 than in 1990 - a conservative estimate. Campaigners say that the EU may only meet its Kyoto targets because countries will simply buy allowances abroad rather than through a trading market. But Brussels claims that the new market will not only work but will cut the cost of meeting targets from €6.8bn to €2.9bn.