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European economists and WWF call for stronger EU carbon market


09 Nov 2006 - Brussels, Belgium – Over 50 leading European economists have signed a WWF statement declaring that emission trading is the best way to tackle climate change and reduce carbon dioxide emissions from large industrial polluters.

The statement, calls for a strengthening of the European Emissions Trading Scheme (EU ETS), as emission trading offers industry the maximum flexibility at the least cost to cut greenhouse gas emissions and provides clear incentives for better technology investments. However, to function effectively it is essential that the market delivers a meaningful price for carbon. This requires a scarcity in supply that can be achieved through tougher emissions limits.

“A stronger EU Emissions Trading Scheme is essential to fulfil the obligations of the Kyoto Protocol and contribute to keep global warming below 2°C compared to pre-industrial levels,” said Dr Stephan Singer, Head of WWF’s European Climate and Energy Unit.

“Most EU Member States are showing little desire to engage, proposing very weak limits to emissions of their installations. It is vital that bad national allocation plans are rejected for the EU to maintain a high standing in the fight against climate change.”

Data released earlier this year show that European governments granted too many pollution permits in the first phase of the scheme (2005-2007), which led to a price collapse. As for the second phase (2008-2012), feeble limits on CO2 emissions, coupled with extremely generous rules for using imported credits, threaten to undermine the scheme.

According to WWF, weak national allocation plans submitted by EU Member States, such as Germany, Poland, France and Greece, must be rejected.

“Our analysis shows that allocations proposed at present are too lax,“ said Cambridge University Professor Michael Grubb, one of the signatories of the WWF statement. ”They will not create adequate incentives either to cut back emissions or to fund investment that helps developing country emission reductions"

However, a few countries, like Spain, stand out for making a serious effort but too many others contradict Europe’s claims to lead on climate change. By making such a small contribution to Europe’s Kyoto targets, they leave EU finance ministries to pick up the bill for compliance.

“We need tighter limits with real cutbacks,” stressed Grubb. "We need to see excessive free allocations replaced by auctioning. The sooner auctioning starts, the better for Europe’s economy and for global climate.”

The EU ETS is a cornerstone of climate change policy in Europe and is the first international trading system for CO2 emissions in the world. It covers approximately 11,400 power stations and heavy industrial sites responsible for half of Europe’s CO2 emissions.

“The trading scheme is a vital instrument for meeting our Kyoto targets and combating climate change beyond 2012,” said EU Commissioner for Environment Stavros Dimas, who signed the WWF statement before being handed to the European Commission.

“I will ensure a tough and fair assessment of all plans and we intend to take decisions on a first set of national allocation plans in the coming weeks.”


• In the first period of the EU Emissions Trading Scheme (2005-2007), installations were allocated more emission permits (allowances) than needed. Actual emissions in 2005 were several million tonnes below the granted permits, thus undermining the credibility of the scheme.

• The European Commission is now considering Member States’ proposed allocation plans for the scheme’s second phase, from 2008 to 2012, and is due to make decisions on the first group of plans imminently.

• Under the Kyoto Protocol the EU committed to an 8% reduction target of carbon dioxide emissions. Penalties will be applied to countries that fail to meet their targets.

• The Kyoto Protocol established Joint Implementation and the Clean Development Mechanism in order to help countries with emissions reduction targets to reduce the cost of meeting their targets by investing in external credits from projects abroad which cost less than they would at home. One of the key aims of the Clean Development Mechanism is also to help developing countries achieve sustainable development.


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