The EU ETS risks repeating mistakes of the past by generous awarding of free carbon allowances to industry when there is scant risk of carbon leakage, Green party MEP Bas Eickhout and environmental campaigners Carbon Market Watch warned on Wednesday.
Writing in an opinion article for The Parliament magazine on Wednesday, Eickhout’s remarks were in stark contrast to those of centre-right MEP Ivo Belet, who in the same publication a day earlier focused on the need to shield EU industry from carbon leakage.
Eickhout is co-ordinating the position of the Green political grouping on the EU Commission’s post-2020 ETS reform plans, which commands 7% of parliamentary seats versus 29% for Belet’s EPP group.
NOTE – EU ETS reforms are only starting to be debated by lawmakers, with an agreed text not due until the end of 2016 at the earliest. Read our analysis for further details of how the proposed changes affect industry.
Eickhout’s views were echoed by environmental campaigners Carbon Market Watch, which published a briefing urging lawmakers to amend the ETS proposal to phase out free allowances for industry while also boosting the Innovation Fund to channel more EUA auction revenue to low carbon innovation.
“An overhaul of the carbon leakage rules is needed to transform the ETS from a pollution subsidy scheme into a system supporting industrial frontrunners that are ready to invest in a climate friendly economy,” said Carbon Market Watch’s Femke de Jong.
She added that cement maker Lafarge and steel maker ArcelorMittal had reported combined revenues of almost €1 billion in the last five years from selling surplus EUAs.
The Carbon Market Watch briefing stressed that free EUA allocations over the past ten years had dampened incentives for industries to invest in clean technologies and as a result some had fallen behind global averages for energy efficiency.
Eickhout said the Commission’s attempt to better target those sectors at risk of carbon leakage was an improvement but not good enough given that “both technological developments and an increase in emission trading systems are decreasing the potential risk.”
He singled out the cement industry as an undeserving case:
“The cement industry remains on the list while there is no international trade in cement at all. How is it possible that such a sector is still eligible for carbon leakage provisions? I call that bad decision-making.”
Eickhout’s key remarks:
- “EU ETS-revenues must directly flow back to industry under the condition that they are used for climate-friendly innovation.”
- “If we do decide to allow for free allocation, we must only focus on the sectors that really need them.”
- “We have to think ahead. That way we not only protect future generations from dangerous climate change, we also make sure that Europe remains a cutting-edge economy.”
By Ben Garside – email@example.com