EU seeks review of emissions trading, stricter caps

Brussels, Belgium - European environment ministers have agreed to revise the EU’s CO2 emissions-trading scheme with the aim of clamping down on weak caps proposed by member states and ensuring that all significant emitters pay the right price for their pollution.

EU ministers called for a full review of the emissions-trading scheme (ETS), the EU’s climate change flagship project, operational since 2005, which allows industrial companies to buy and sell carbon credits on the market in order to achieve target cuts in the amount of CO2 emissions they release into the atmosphere.

Responding to criticism that too many allowances have been handed out in recent years, ministers agreed that the cap-setting mechanism for member states should be bolstered, giving governments fewer opportunities to over-allocate. They also said that a larger number of credits should be auctioned in the future, rather than given to companies for free – a move so far resisted by companies. But a move towards 100% auctioning still appears unlikely, with ministers instead calling for a minimum rate to be established.

The Environment Council also agreed that the cap-and-trade system should cover greenhouse gases apart from CO2 and should apply to “all installations with significant CO2 emissions” – not only power generation and energy-intensive industries. A proposal to include aviation in the scheme has already been tabled, but other sectors, such as land use, forestry and surface transport, as well as smaller business installations, could also be included in the near future.

More robust compliance and enforcement mechanisms should also be considered to ensure the good functioning of the scheme, ministers said.

Some environmental organizations raised concerns that tightened emissions limits will be undermined by plans to allow companies to buy more credits from outside the EU under the Clean Development Mechanism (CDM). Firms will be more likely to buy cheaper credits from “potentially dubious” CDM credits, warned the Climate Action Network Europe, WWF, Greenpeace, and Friends of the Earth.

NGOs also remain doubtful as to the inclusion of new sectors, saying that emissions from land transport, for example, could be much better dealt with by other measures such as fuel-standards taxes, and insisting that the goal of the ETS should remain to tackle emissions from large industrial point sources.

The Commission is due to present a legislative proposal before the end of 2007 to shed more light on how the scheme will finally be amended.

Read the Conclusions on Review of the European Union Emissions Trading Scheme from the European Council (PDF).

For More Information: EurActiv

You can return to the main Market News page, or press the Back button on your browser.