ETS figures show Europe's flagship in danger of running aground

The EU has published figures showing who is producing the most carbon and who is doing what to offset their emissions, under its continent-wide trading scheme.

Europe argues the scheme has been a success, pointing to the fact that over 99% of the 9,400 polluting installations have met their targets or bought in credits to make up shortfalls.

But critics argue the ETS has been a licence to pump, with unambitious targets allowing polluters to take a business-as-usual approach.

Most states seem to be having little trouble persuading industry to play ball by offering easy-to-meet targets, with one striking exception.

Of the 865 installations not complying with the trading scheme across Europe, 647 are based in Italy.

The release of the figures have been met by derision from environmental NGOs, which argue that while Europe may give every appearance of trying to tackle its emissions, the continents carbon output continues to rise in the real world.

Easy-to-meet targets and exaggerating the baseline of emissions on which future allowances are made have both been blamed by the environmentalists for the scheme's perceived failure to deliver.

Meanwhile, the early leaking of figures from several proud member states showing they had hit their targets and wouldn't need to buy in extra allowances led to the collapse of the market for carbon credits last month (see related story).

The EU is currently setting the allocations for the second phase of the programme, which will run from 2008-2012.

Under the cap-and-trade scheme polluting installations are given a fixed allowance of carbon they can emit.

Those that miss their targets have to buy in carbon credits from those who have met their and have them left over.

Failure to do this means companies must pay 40 Euros per extra tonne of carbon they emitted.

In the UK nearly all companies have complied with the requirements of the
scheme to report emissions and surrender an equal number of allowances.

Environment and climate change minister Ian Pearson said the published results showed the scheme could work but raised a question mark over the level of allocations.

"These results represent the completion of the first year of the scheme and are a major milestone," he said.

"It is still very early days for this groundbreaking scheme."

"While the system appears to be functioning effectively, the results across the EU do raise questions about the stringency of the caps in some Member States.

"We will be looking very carefully at these results over the next few weeks, in particular in the context of the plans for the next phase which are currently under development.

"I will be encouraging the Commission to use this information to improve the enforcement of tough caps for Phase II so that the scheme provides the appropriate incentives for investment in clean technology.

"I will also be supporting the Commission in its efforts to improve and strengthen the scheme in the longer term through the review it will be launching next month.

"Compliance with the scheme in the UK has been excellent - almost all
operators submitted their verified emissions reports and surrendered
the correct number of allowances within the deadlines.

"This could not have been achieved without significant effort from all industries covered by the scheme, and by the verifiers and regulators involved who have had to get to grips with the demands of this new measure."

Meanwhile, the environmental NGOs have been less forgiving.

In a joint statement WWF, Greenpeace, Friends of the Earth and the Climate Action Network (CAN) accused Europe's governments of financial chicanery and allowing their industries to produce as much carbon dioxide as they wished at no extra cost.

"Evidence from the markets proves that most member states granted their industries far too generous carbon emission allowances in the period 2005-07," said the statement.

"The European Commission and Member States must ensure that the total available pollution permits are significantly reduced for the second round of trading, from 2008 to 2012."

Matthias Duwe, director of CAN Europe said: "European governments have blatantly ignored the aims behind the ETS and abused the trading scheme, under pressure from their dirty industries.

"This stalls the EU's flagship climate policy. Governments need to grab control of the wheel and steer a clear path to emission reductions.''
Stephan Singer, head of the European climate and energy unit at WWF took a more measured approach.

"The market can only become functional and create incentives for cleaner industries if the amount of allowances is set at a level which is in line with the Kyoto targets, allowing Europe to meet its international obligations", he said.

"A loss of credibility of the EU Emissions Trading Scheme will also undermine the credibility of the EU in the negotiations for new Kyoto targets after 2012".

Full details of the national registries can be found here.

Peter Ainsworth, the Conservative's Shadow Environment Secretary, said the whole programme had been a shambles.

"Most countries have persuaded the Commission to dramatically over allocate carbon permits.

"This means they have drastically undershot their targets, which has unsettled the market in carbon.

"We need the Government to persuade the EU that significant changes are needed in the way the Commission allocates carbon permits to member states.

"A continuation of the present system - which includes political horse-trading and backroom deals - would seriously risk bringing the whole concept of carbon trading into disrepute."

Chris Davies, the Lib Dem spokesman for the environment, said it was the polluters themselves who had thrown a spanner in the works and had only themselves to blame if they found themselves ignored in the next round of allocation setting.

Chris Davies MEP, Liberal Democrat Environment Spokesperson, commenting on the European Commission press release on the EU Emissions Trading Scheme (ETS), said today:

"In preparing for the introduction of the ETS some industry groups did not just cry wolf, but shouted it from the rooftops," he said.

"Companies in France, Germany and elsewhere will only have themselves to blame if the European Commission ignores their views in the future and imposes tough requirements to bring CO2 reductions back on target."

Sam Bond



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