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Improving the EU ETS for the climate: NGO perspective on the ETS review

This presentation by Ruta Bubniene of Climate Action Network Europe discusses the ETS as the main tool to achieve C02 reductions in the European Union. It considers the positive and negative effects of NAPS 1&2. It provides the purpose and timeline for a review of the EU ETS directive as well as conclusions of what direction the review should take. Finally, it provides links to further reading on the evaluation of NAPs and Aviation’s effect on climate change.

EU ETS basics

Largest emitters (electricity/heat > 50MtCO2, industry (paper, glass, ceramics, aliuminium, steel, oil refineries) about 11 500 installations;

Only CO2

National allocatition plan 2005 – 2007

National allocation plan 2008 – 2012

About 50% of Europe’s CO2!

Purpose of the EU ETS cost-effective reduction of CO2

ETS main tool to achieve reductions in the EU

Internalise cost of climate change

Send price signal to businesses for technological innovations

Send signal to the rest of the other countries

Reductions are possible!

Positive lessons from NAPs 1&2:

+ The principle of absolute caps established
+ Carbon price has reached the board rooms
+ Initial emission reductions are being realised
+ ETS operation has supported developments in other parts of the world (USA, Australia, et al)

Negative lessons from NAPs 1&2:

- Overallocation threatens Kyoto targets and market scarcity
- Allocation rules often give perverse incentives
- Power sector has made good (windfall) profits
- Process transparency insufficient

Review of EU ETS directive

Purpose of the review:

Improve on the basis of the main lessons learnt so far

Make the ETS fit for a post-2012 world: deeper reductions

Potential: use the ETS as a driver to develop post-2012

However:

Current level of experience is still limited

NOT: rethink the concept, question the existence of the ETS

Review of the EU ETS directive – time line

------------ NAP II Preparation and Adoption ----------->
gr top

--10/06--11/06--12/06--1/07--02/07--03/07--.........XX/07

Key CONCLUSIONS for the review

A: Targets:
ETS must enshrine the principle of continuous reductions
B: Allocation:
Allocation mechanism must ensure internalisation of carbon:
relatively more pollution = relatively higher cost
Auctioning is the most effective and simple way to implement this
C: External credits:
ETS must have quantitative and qualitative limits on JI/CDM use
D: Expansion:
A dedicated emissions trading scheme for aviation as part of a package
E: Things NOT to do...:
The review of the ETS must strengthen its climate effectiveness

CAN-Europe evaluation of NAPs 2005-7

Further reading:

http://www.climnet.org/euenergy/NAPs.htm

Aviation

Further reading:

Clearing the Air
The Myth and Reality of Aviation and Climate Change

Climate Action Network Europe
Rue de la charité 48, 1210 Brussels
www.climnet.org / ruta(@)climnet.org

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