Work
01.December 2005 - 00:00
Emissions trading scheme
Now that EU Directive 2003/87/EC(1) on emissions trading has been in force for almost a year, the underlying problems of the current scheme have become evident. Emissions trading has produced some counterproductive effects which have led in the wrong direction with regard to both the climate and the economy. As a market mechanism with strict targets, the emissions trading scheme is vulnerable to market distortions. The increasing prices of emissions rights create additional costs. It also distorts our energy market and unnecessarily increases the price of electricity, threatening the competitiveness of the EU’s energy-intensive, yet very environmentally-friendly industry. By doing so, it creates a more serious problem, that of carbon leakage. If production is transferred to areas with less strict emission norms, emissions as a whole increase. Similarly, at European level, national emission quotas have upset the emissions trade, which was intended to be a flexible market mechanism, and have turned it into something quite different. Therefore it has to be stated that the emissions trading system used in Europe has more to do with structural politics than with curbing greenhouse gas emissions.
In the light of the evidence secured to date, what tangible measures will the Commission now take in order to further develop the Emissions Trading Scheme, thereby minimising the adverse effects on the economy and the environment?
An answer given by Mr Dimas on behalf of the Commission
As mentioned in the reply to written question E-3444/05 by Mrs Korhola, the instrument of emissions trading is a cost-effective instrument to reduce greenhouse gas emissions. The Community has adopted the emissions trading Directive in order to assist Member States in complying with their Kyoto targets. Because of the novelty of the instrument for all those involved the first trading period, 2005 to 2007 is a very useful learning phase in order to have a well-functioning scheme for the Kyoto commitment period 2008 to 2012.
It is certainly too early to draw any final conclusions on the functioning of the EU emissions trading scheme (EU ETS). The Commission is currently conducting a review of the EU ETS and will present a report to the Parliament and the Council by the end of June 2006, pursuant to Article 30 of the EU ETS Directive. To this effect, the Commission conducted an extensive stakeholder consultation during the summer of 2005. Several hundred replies were received and first results were published in November of 2005. The Commission will, inter alia, consider in its report the functioning of the allowance market, covering in particular any possible market disturbances, allocation of allowances and the relationship of emissions trading with other policies and measures.
The Commission takes note of recent developments in electricity prices but underlines that a variety of factors have led to the increases, including an increase in energy prices world-wide during 2005, notably through developments in the oil market. The Commission will further examine to what extent the price of allowances has an impact on power price developments.
(1) OJ L 275, 25.10.2003, p. 32.
Now that EU Directive 2003/87/EC(1) on emissions trading has been in force for almost a year, the underlying problems of the current scheme have become evident. Emissions trading has produced some counterproductive effects which have led in the wrong direction with regard to both the climate and the economy. As a market mechanism with strict targets, the emissions trading scheme is vulnerable to market distortions. The increasing prices of emissions rights create additional costs. It also distorts our energy market and unnecessarily increases the price of electricity, threatening the competitiveness of the EU’s energy-intensive, yet very environmentally-friendly industry. By doing so, it creates a more serious problem, that of carbon leakage. If production is transferred to areas with less strict emission norms, emissions as a whole increase. Similarly, at European level, national emission quotas have upset the emissions trade, which was intended to be a flexible market mechanism, and have turned it into something quite different. Therefore it has to be stated that the emissions trading system used in Europe has more to do with structural politics than with curbing greenhouse gas emissions.
In the light of the evidence secured to date, what tangible measures will the Commission now take in order to further develop the Emissions Trading Scheme, thereby minimising the adverse effects on the economy and the environment?
An answer given by Mr Dimas on behalf of the Commission
As mentioned in the reply to written question E-3444/05 by Mrs Korhola, the instrument of emissions trading is a cost-effective instrument to reduce greenhouse gas emissions. The Community has adopted the emissions trading Directive in order to assist Member States in complying with their Kyoto targets. Because of the novelty of the instrument for all those involved the first trading period, 2005 to 2007 is a very useful learning phase in order to have a well-functioning scheme for the Kyoto commitment period 2008 to 2012.
It is certainly too early to draw any final conclusions on the functioning of the EU emissions trading scheme (EU ETS). The Commission is currently conducting a review of the EU ETS and will present a report to the Parliament and the Council by the end of June 2006, pursuant to Article 30 of the EU ETS Directive. To this effect, the Commission conducted an extensive stakeholder consultation during the summer of 2005. Several hundred replies were received and first results were published in November of 2005. The Commission will, inter alia, consider in its report the functioning of the allowance market, covering in particular any possible market disturbances, allocation of allowances and the relationship of emissions trading with other policies and measures.
The Commission takes note of recent developments in electricity prices but underlines that a variety of factors have led to the increases, including an increase in energy prices world-wide during 2005, notably through developments in the oil market. The Commission will further examine to what extent the price of allowances has an impact on power price developments.
(1) OJ L 275, 25.10.2003, p. 32.