Emission impossible for carbon trading

Brussels, Belgium – One of the world’s most important mechanisms to tackle climate change is set to be undermined because of short-sighted plans to allow European companies to buy their way out of making reductions in their greenhouse gas emissions, a new WWF report shows.

The report, Emission Impossible, looks at the carbon reduction plans of nine EU member states (UK, Germany, Poland, Ireland, France, Spain, Netherlands, Portugal and Italy) and estimates that between 88-100 per cent of these countries’ combined emissions reductions targets under the EU Emissions Trading Scheme (ETS) could be met buy buying in credits from outside the EU.

The EU ETS is among the planet’s biggest and most ambitious projects designed to tackle climate change. While the mechanism of carbon trading is sound in principle, the first phase of the EU scheme (2005 to 2007) has been seriously undermined by weak political decisions.

WWF’s report shows that there are now significant concerns that the second phase (2008 to 2012) will also fail to deliver any significant emissions reductions within the EU because of the potential for very heavy use of imported credits.

The EU ETS was designed to drastically reduce Europe’s emissions by capping the amount of carbon dioxide that businesses are allowed to emit. Bigger emitters are able to buy carbon allowances — which effectively allow them to pollute — from companies that have reduced their emissions. However, EU governments handed out far too many allowances to their industries in Phase I. This over-allocation caused the carbon market to virtually collapse and means that very little if any emission reductions are going to be made at all as a result of the scheme.

For Phase II the European Commission has sought to clamp down on the caps proposed by many Member States. However, this is being weakened by a decision to allow industries to buy massive amounts of credits from projects outside the EU (under the Kyoto Protocol’s Clean Development Mechanism, or CDM). This reliance on cheap imported credits means that European industry may not have to reduce its own emissions at all.

“The European Commission’s decision to allow companies to buy huge volumes of project credits means that heavy industry, including the power sector, could potentially buy its way out of cutting its own emissions" said Dr Keith Allott, head of WWF-UK’s Climate Change Programme.

"There is a real danger that this will lock the EU in to high carbon investments and soaring emissions for many years to come, wrecking the EU’s emission reduction targets for 2020 and 2030 and making a mockery of Europe’s standing as a world leader in tackling climate change.”

WWF also has serious concerns about the validity of many of these overseas projects. In order to qualify as CDM projects, they have to show that they are “additional”, which means that they would not happen without funding from carbon trading. However there are significant questions about whether this critical principle is being adhered to effectively. If the projects are not additional, then the sale of credits from them leads to an actual increase in carbon emissions.

“If the ETS is to fulfil its potential, we must ensure it leads to real carbon emission reductions within Europe" Dr Allott added.

"The ETS is once again at a crossroads. It can either become a robust and effective way of reducing carbon emissions, or it can become a messy and deeply flawed market for a virtual commodity that only really benefits the traders. Climate change is an urgent priority, and we can’t afford to waste another five years before we get Europe’s emissions on a downward path.”