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Emissions Trading suffers a blow in Europe

Published 23rd September 2009 - 11 comments - 1379 views -

The Emissions Trading Scheme in the EU has been criticised for several reasons, but especially because its been too generous in providing businesses with EUAs, so that businesses ended up with more free emissions allowances than they needed - with the result that carbon prices slumped. In the second, current, phase of the ETS, there were several improvements, but the scheme still suffered from several defects. So when the Court of First Instance yesterday ruled that the Commission couldn't intervene to overturn what it had found to be overgenerous emissions allowances based on its own evidence, the ETS suffered a further blow to its credibility.

With this judgment the price of EUAs, which had risen from 13.85 Euros to 14.93 Euros over August, fell to 13.20 Euros:

"Prices for EUAs were down 3.9% at €13.20 euros ($19.54) a tonne in the wake of the decisison. "It's bearish news. It sets a precedent for other countries," Reuters quotes one trader as saying. 

The Commission had cut by 27% Poland's original request for 284.6 million tonnes of EUAs annually from 2008-12, and had cut Estonia's requested quota by 48%." [Via EurActiv]

The court's ruling stated that the Commission can't use its own information or research to redraw a binding National Allocation Plan (NAP) for a member state as part of its power of review: the power of review is just to check that the NAPs comply with the criteria of Directive 2003/87/EC (as amended). Member states have the sole power to:

"...to take final decisions fixing the total quantity of allowances which it will allocate for each five-year period and the distribution of that quantity amongst economic operators. the Court states in that regard that Member States have a margin for manoeuvre in decising the method which they adopt in order to draw up their NAP for allowances." [Press Release; see links below]

This doesn't mean that the member states can choose their own quotas purely to suit themselves; they still have to follow the criteria. As EurActiv reported:

"Stig Schjolset, senior analyst at  Point Carbon, who nevertheless added that if upheld, the ruling did not give Poland and Estonia the power to choose their quotas.  "The court does not say NAPs should be as the member states proposed. It decided that the Commission assessment should be annulled and re-done with different data.""

Nevertheless, its a blow to the credibility of the ETS, and with the margin of discretion that member states have when drawing up their NAPs, this ruling opens up the possibility that the number of EUAs will increase, depressing the price of emissions and reducing the economic incentive for businesses to become greener. The danger here is great since, as the law at the EU level is a Directive, the member states "transpose" the law into their national law - so they get to write their own national version, with the result that some laws are tougher than others, and member states may be able to widen any margin for manoevre in the original Directive.

The Commission has two months to appeal the decision to the European Court of Justice, which is likely since the Commission is anxious to maintain the EU's perceived Climate Change leadership role in the world.

 

(You can read the official press release here (PDF); links to the Directive in its various stages of amendment can be found here - note that the case was brought to court in 2007)

Category: Greenhouse Gases, | Tags: european union, european commission, european court of first instance, emissions trading scheme,



Comments

Daniel Nylin Nilsson on 24th September 2009:

Tricky… I think changing the emission allowences could bee seen as changing the rules as you play, which some people would not consider fair. Especially since the idea is to cive an incentive to cut emissions to those who would not do it voluntarily, out of their own conviction.

On the other hand, changing the rules as you play is what politics is about, and it might be necessary some times.

I think this case illustrates how important it is to get things as right as possible from the start, something I hope world leaders will remember in Copenhagen in December.

Conor Slowey on 24th September 2009:

It is a tough situation to deal with; I suppose both sides thought that the other was trying to change the rules in this case in order to get the result they want. With the ETS, the rules will be changing with each phase - for example, aviation will be included to a degree after 2012.

It does mean that the legal and moral pressure to cut further has been lifted to a degree from Poland and Estonia (and the Czech Republic and others, if their claims are successful). They can now claim to meet the “European standard” for meeting a target that is less that perhaps it should have been. Of course, I haven’t seen the figures or read the cases in full yet (they might still be in translation, or the Eur-Lex site might just be being awkward again), so I can’t really comment on how they’ve worked out the figures.

It’s definitely important to get things as right as possible early on - right down to the small print!

Conor Slowey on 25th September 2009:

Update:

EUobserver has reported that the Commission is trying to delay any increase in allocations by Poland and Estonia until it can review its decision: http://euobserver.com/9/28720

Also, Berlusconi is now pushing for more allowance for Italy (can’t help but smile at the spokesperson’s curt response):


“Meanwhile, Italian Prime Minister Silvio Berlusconi has used the occasion to argue that his country should be able to issue additional carbon allowances in a letter to European Commission President Jose Manuel Barroso.

“I’m well aware of [the letter],” the commission’s environment spokesperson, Barbara Helfferich told reporters on Thursday. “The CO2 limits are set and are normally non negotiable.””

online share trading on 26th September 2009:

very informative article .... thx 4 the post

Federico Pistono on 26th September 2009:

Berlusconi does not care about climate change, as he profusely stated in various interviews:
http://blogeko.libero.it/2008/berlusconi-e-la-messa-in-piega-del-clima/

In fact, according to his staff of self appointed experts, climate change doesn’t it exist, it’s a scam invented by the communists/leftists/hippies/environmentalists or whatever he thinks at the moment.
http://www.ecologiae.com/pdl-effetto-serra-non-esiste/5613/

In his words “We cannot waste time and money on these things when we have a problem with the economy”.

Yes. And, I might add, with his disputable personal life, his accusations for:
- bribery of judges (Mondadori)
- false testimony in the P2 masonic lodge trial
- false accounting (All Iberian 2 and Sme-Ariosto 2)
- charge for the sale by IRI
- bribes to judges
- Bribery of the Guardia di Finanza
- false accounting on Medusa Cinema company
- bribes to the judge Renato Squillante
- embezzlement
- tax evasion
- another false accounting (Macherio estates)
- greement on the division of publicity between Rai and Fininvest televisions
- traffic of drug
- Tax bribery on the Pay-tv
- Collusion into the 1992-1993 slaughters
- Mafia collusion
- together with Marcello Dell’Utri
- money laundering
- Bribe to the lawyer David Mills
- Corruption of senators of the Romano Prodi government camp.

That is, what emerged. There’s still plently we have no idea of.

Do you really think a guy like him would have any interest in the good of the planet and the people?

skin tag removal on 30th September 2009:

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stop premature ejaculation on 31st October 2009:

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internet stock trading on 31st October 2009:

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Paul Montariol on 05th December 2009:

You bring the proof here that the question of the reduction of the emissions is unresolved.
I recommend for my part to require in 2015 and after all the countries will have to increase their production by new energies of 3% per annum.
3% on the consumed total.
4% then after two or three years.

Conor Slowey on 09th December 2009:

@ Paul

I’m not sure if there’s any positive legal requirement that the EU has put in place for increasing the production of renewable energies (I’ve never heard of one). It could be a good idea to set one in place, and use the European Investment Bank to aid states in the development of renewable projects.

However, I can’t see it happening because it’s one thing for the member states to accept negative limits (i.e. being prevented from doing something/capping emissions) and another thing to proscribe how they spend their money (and it would have to be their money, since the Commission has a tiny budget). So it’s probably politically very unlikely, though I’m not sure of the legality of it.

It would be a good target to set in place, if the institutional and fiscal muscle could be put behind it.

Paul Montariol on 09th December 2009:

If you prefer we can say more simply than it is easier to require an increase in new energies than a reduction of the CO ² emissions.

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