Fiasco of CO2 emissions !

http://www.energyfuture.org.uk/index.php?option=com_content&task=view&id=149&Itemid=59

Greenpeace on the fiasco of the CO2 emissions trading scheme

“Industry simply inflates its own emissions projections ... to ensure it maximises the number of free permits that it gets.”

By Robin Oakley, Senior Campaigner, Climate and Energy, Greenpeace
The European Emissions Trading Scheme (ETS) is the most ambitious and innovative intergovernmental policy so far aimed at reducing greenhouse gas emissions. Its success, or failure, has enormous implications for European efforts to cut CO2 emissions.
The scheme covers nearly half of Europe’s CO2 emissions sources and is seen as a key plank of both collective European and individual member states’ policies to tackle climate change. Many national hopes have been pinned to the system, not least the UK’s. In one sense, Europe is leading the way in implementing market based, cost-effective solutions to a global problem. A successful ETS is not only vital to deliver the EU’s current and future targets under the Kyoto Protocol, but could also form the cornerstone of future global agreements to fight climate change.
However, there is another side to the story. Done badly, the system risks turning into a disaster, failing to deliver the cuts in CO2 required and failing to create long term markets for real clean energy solutions, whose development is fundamental to longer term, deeper emissions reductions. In fact, the ETS has already been seriously undermined by some huge mistakes made during the first phase of the scheme (2005-2007) and is currently failing to deliver real cuts in greenhouse gas emissions.
The biggest mistake to date was that governments massively over-allocated CO2 permits as the recent market crash in the carbon price has shown. At the time information first emerged about the real level of emissions in various countries, the price fell by more than 60% (from around 30 Euros to as low as 8.6 Euros per tonne).

How did this over allocation happen? Primarily it is because the system relies on future emission projections as a method to set a cap and then gives out permits for free. Industry simply inflates its own emissions projections in order to ensure it maximizes the number of free permits that it gets – permits that, once allocated, have a significant financial value.
This set up is a license for polluters to print money, as indeed they have. Estimates put the windfall profits for some UK utilities at around £1 billion per year.
Meanwhile, in Europe, the German Environment Minister claimed that the four biggest European power producers – Eon, RWE, Vattenfall and EnBW – were profiteering from the ETS at the expense of consumers, stoking their earnings by between €6bn (£4.1bn) and €8bn. Certainly it is the case that most European countries over-allocated in Phase 1, with weak governments caving in to industry pressure and accepting falsified emissions projections. In the end, 20 out of the 25 EU states emitted less than the allowances they had been allocated. In the UK, the machinations of the utility companies continued, with the collusion of government. As one of the few countries where the power sector was not going to emit less than its allowances (largely due to increased burning of coal) the UK government appealed to the European Commission to be allowed to loosen the cap for Phase I; releasing more permits to those companies affected. The Commission ruled that it was too late to revise the cap and, in response, five UK utilities (RWE npower, Scottish Power, Scottish and Southern, International Power and Drax) initiated legal proceedings against the Commission – effectively suing for the right to pollute more. The fact that the scheme is supposed to force emission reductions apparently escaped notice.A Greenpeace report, ‘Increasing the Ambition of EU Emissions Trading’ assesses the Phase 2 caps, or National Allocation Plans (NAPs), for the UK, Germany and the Netherlands. Greenpeace believes that, under the Commission’s own criteria, the UK NAP should be rejected, because it fails to ensure that the ETS players are on course to fulfil their fair share of reducing CO2 emissions by 20% by 2010 (which is the UK target under its national climate change programme). Indeed the UK’s Phase 2 NAP is only very slightly lower than that for Phase 1. The fact that the UK government failed in efforts with the Commission to secure late additional allowances in phase 1 should not be used as an excuse to try and compensate industry in Phase 2. How can this farce be avoided in future? The caps have to get tighter, faster; they have to underwrite real, science based targets; and they have to be immunized against the vested interests of industry lobbies and weak politicians. Governments are too focused on their national interest and too weak to resist lobbying from industry. Meanwhile utilities have a massive incentive – windfall profits in the billions – to work the system to their profit and its detriment. What is needed is a centrally allocated, science-based cap set against a fixed baseline by the European Commission and a complete end to the free hand out of emissions permits. If that can be achieved, then the EU ETS could show the way to a global scheme of emission reduction that could help save our climate. If it cannot, then the ETS risks becoming merely another way for multinational polluters to profit from climate change, reaping windfalls and avoiding effective action, while emissions and temperature both continue to rise.