A report by the Environmental Audit Committee warned today that the EU's flagship Emissions Trading System (EU ETS) is failing to deliver vital investment in green technologies and that the Government should consider introducing a new carbon tax to guarantee a minimum price for carbon.
In its report, the
Environmental Audit Committee (EAC) says the
EU ETS is central to the UK's efforts to
cut emissions, but is currently failing to deliver.
A fundamental problem is that the caps set by the
EU ETS have not been tight enough to sufficiently challenge the emitting behaviour of
businesses, the report concludes.
Phase II, which runs from 2008 to 2012, was supposed to be tougher than Phase I, but has been undermined by the recession.
Big companies were allocated free emissions allowances on the basis of business as usual, but as economic activity has slowed, many have found themselves with more carbon allowances than they need – which has in turn suppressed the price of carbon and made green investment look less attractive.
Evidence heard by the committee suggested that, in order to drive urgently needed investment in green technologies, the carbon price needs to rise from the current level of around €15 (£13.13) per tonne of CO2, to around €100 (£87.5) per tonne, or even higher.
"Emissions trading should be helping us to combat climate change, but at the moment the price of carbon simply isn't high enough to make it work," said Tim Yeo MP, the EAC’s chair.
He added: "If the Government wants to kick-start serious green investment, it must now step in to stop the price of carbon flat-lining.
"Ministers should seriously explore the possibility of a carbon tax and must press the EU to tighten up the overall caps in the
ETS."
Minimum price for carbon may not be answerThe CBI said today that it shares the
EAC’s doubts about the ability of the
EU ETS to drive sufficient future investment in technologies like nuclear, but it questioned whether setting a minimum price was the right answer.
“It should be remembered that many low carbon technologies, such as renewables and clean coal, have their own support schemes, with a higher carbon price that encourages new technologies to be brought to market," said CBI deputy director-general John Cridland.
“The reason the carbon price is currently lower than expected is because the market believes the recession will make the EU’s targets easier to meet. The committee is right to raise the option of reducing the ETS cap, but in practice this will depend on whether the EU decides to increase its 2020 targets which, in turn, will depend on international negotiations.”
Friends of the Earth’s international climate campaigner Sarah-Jayne Clifton described the EAC’s report as “yet another nail in the coffin for the Government's deeply flawed reliance on carbon trading to tackle climate change.”
She added: "Not only is trading failing to drive down emissions, banks are growing fat developing ever more complex trading systems – and this risks another financial crash similar to that caused by sub-prime mortgages.
“The Government must abandon its obsession with the carbon trading con and meet its legally binding UK carbon budgets without offsetting.”
EU ETS should link up with other emissions trading schemesThis is very far from the EAC’s own conclusions.
Indeed, its report looks at the prospects for taking carbon trading global, by linking the
EU ETS with other emissions trading schemes.
"Only a global effort will make a real difference in tackling climate change. Other countries outside Europe are developing emissions trading schemes, and these need to be joined up,” said Yeo.
"The Government and the rest of Europe should actively push for this, while ensuring that in doing so action is taken to at least maintain the carbon price."
Related News:
Environmental Policy and RegulationsEU ETS NewsCarbon Tax NewsCarbon Reduction NewsRelated Links:
EU ETSEnvironmental Audit Committeewww.cbi.org.ukwww.foeeurope.org