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EU climate policy in crisis after MEP's vote

17.04.2013

Yesterday the European Parliament voted against a proposal to delay the auctioning of 900 million tonnes of carbon allowances in the EU’s Emissions Trading System (ETS) – a move proposed by the European Commission to rescue the ailing ‘cornerstone’ system of Europe’s climate legislation which puts a price on carbon emissions.

Fix the ETS Infographic. Click to enlarge or see the PDF at bottom of page.


As a result, the European Voice reported that the price of carbon plummeted 45% to a record low of €2.63. The ETS system was designed around a carbon price of approximately €20, but an over-allocation of allowances and the economic crisis has meant the price of carbon has been around €7 per tonne in recent years – not expensive enough to make it a disincentive to invest in carbon polluting industries like fossil fuels.

“MEPs have voted against the polluter pays principle: the carbon price will continue having no impact on investment decisions in the power sector,” Rémi Gruet, Senior Climate Advisor at EWEA, said.

Some politicians had been lobbying hard to try and sway MEPs to back the Commission’s proposal. The Climate and Environment Ministers of Germany, France, Italy, the UK, Sweden and Denmark wrote a letter last week urging MEPs to back the plans.

“We need an effective price signal from the ETS if we do not want to put our long-term climate targets at risk. Otherwise investments in non-sustainable, CO2-intensive technologies would lead to lock-in effects and would make the achievement of our long-term climate targets more expensive or even impossible,” the letter said.

Fatih Birol, International Energy Agency Chief Economist said that the failure of the carbon market in Europe has global implications for climate change.  “Europe is the region that started this endeavour, which the world, perhaps with some modifications, has to follow. If we say that this exercise didn’t work out, this would be a loss not only for Europe but for everybody,” he added.

NGOs are also angry at the decision because they believe the pressure of a small but intense group of business lobbyists prevailed despite broad support and the strong need to fix the system. “It is outrageous that Parliament seems to value polluting industry more than Europe’s green future,” Julia Michalak of CAN Europe said.

“In its present form, the carbon market will not stop a single coal plant from being built,” said Greenpeace EU climate policy director Joris den Blanken. Greenpeace now say that national governments must take up where EU-level governance failed by imposing measures like taxes on coal-fired power plants.

While yesterday’s vote was clearly catastrophic for the EU’s carbon market, the “backloading” proposal is still on the table. It has been referred back to the Parliament’s Environment Committee and an even more ambitious and long-term rescue plan could be proposed.

Find out more about how the ETS and the Commission’s original proposal work here.

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