$300 Billion Carbon Fiasco: EU Emissions Trading Scheme Falters
Europe has failed to raise carbon prices enough to spur green energy use but now the emissions trading system (ETS) could face its final blow in a European Parliament vote on 19 February.
The lack of European Union-wide progress means more nations are expected to follow the example of Britain and take action on their own.
EU efforts in the immediate term are focused on the vote in the EU legislative’s environment committee which will provide the next signal of whether a plan to bolster the ETS can proceed.
According to some analysts, the vote is too close to call.
Even if agreed, analysts predict it will be years before European carbon prices rise to the level of at least €40 that they say is needed to spur investment in low-carbon energy.
That’s good news for intensive energy users and coal-burners, but bad for governments committed to 2020 environmental targets for which they need to bolster green energy use.
A positive vote next week would give an indication of whether the EU has the political will for deeper reform needed over the longer term.
It would then require further debate among member states and a plenary session of the European Parliament.
With or without action, analysts say the market’s weakness means national initiatives will proliferate, running counter to the pursuit of a single EU energy market.
“Fragmentation is something we have already seen. The latest example of fragmentation is the UK,” said David Hone, climate change adviser for Royal Dutch Shell, regarding Britain’s decision to establish a carbon price floor from April.
“We will see more and more of this. It will be a progressive process. It’s a process that has started.”
The European Commission last year proposed a plan to temporarily remove some of the huge surplus of carbon permits that has weighed on prices.
It hoped for agreement before the start of the 2013-2020 third trading phase of the carbon market but German indecision and Polish opposition have helped delay a decision while adding to market uncertainty.
Indecision and opposition
Coal-dependent Poland has been openly hostile to market intervention and Germany so far has avoided taking a stance.
While Germany needs a higher carbon price to spur its shift to renewable energy, Chancellor Angela Merkel faces an election and industry pressure to avoid action that might raise energy prices.