The shift away from free allocations to auctioning, particularly full auctioning in the power sector starting in 2013, means that companies in the future will have to pay to emit carbon. “If backed by the Council, we will finally have corrected the biggest flaw in the EU Emissions Trading Scheme – the free allocation of allowances. We would end the current polluter-benefits practice and establish a true price on carbon pollution,” commented Christian Kjaer, CEO of EWEA. “Compared to the current situation, auctioning will avoid giving windfall profits to conventional power generators which have passed on the cost of allowances in the electricity price, despite receiving them for free[1].”

EWEA is pleased that revenues generated from the auctioning of allowances are earmarked for climate change mitigation purposes, including renewable energies such as wind power.

However, EWEA is disappointed that a small majority of the Committee voted in favour of additional free allocations for CCS (so-called double credits), thus causing a disruption of the ETS-market mechanism designed to ensure that emission reductions happen as cheaply as possible.

EWEA is also concerned that, with today’s vote, roughly 40% of the emission reduction objective can be reached through external credits, meaning that a large portion of the reductions will happen outside the EU. This means that the EU would only commit to a 12% reduction in domestic carbon emissions.  However, science suggests that emissions in the EU ETS sectors should be reduced by 37% to 53% in order to limit temperature increases to 2°C and avoid dangerous climate change.

Negotiations with Council will be starting soon in order to get an agreement on the entire Climate and Energy Package in time for the December plenary session and for the Poznan negotiations on a post-Kyoto agreement.

[1] In phase one of the EU ETS, conventional power generators are believed to have made over €12.2 billion windfall profits in the UK. There have been similar arguments over windfall profits in other European countries, such as Germany and Spain. Carbon market experts see the situation as likely to arise again in the second trading period. According to a recent Point Carbon study of the UK, Germany, Spain, Italy and Poland, power companies could reap profits in excess of €70 billion over the next four years.

Note to editors:

EWEA is the voice of the wind industry, actively promoting the utilisation of wind power in Europe and worldwide. It now has 500 members from 50 countries including manufacturers with more than a 90% share of the world wind power market, plus component suppliers, research institutes, national wind and renewables associations, developers, contractors, electricity providers, finance and insurance companies and consultants. This combined strength makes EWEA the world’s largest and most powerful wind energy network.