Business needs long-term certainty on emissions trading

Long-term certainty and predictability, particularly over allocation of allowances, are the most important factors for business when considering emissions trading.

The more certainty and lead-time they have, the easier it will be for companies to invest in the right technologies for the future.

These are the key findings of a recent stakeholder consultation on the EU Emissions Trading Scheme, part of an ongoing review of the scheme. The results show that ETS is already influencing companies’ investment decisions, and for half of respondents, it was one of the key issues when taking long term decisions.

Moreover, about half of the companies claim that the scheme has a strong impact on decisions to develop innovative technology.

Environment Commissioner Stavros Dimas thanked all stakeholders who took part in the consultation: “The fact that the emissions trading scheme is up and running is a tremendous success, but we are already looking at how to improve it. For that we need the cooperation of the stakeholders who have hands on experience. The better the design of the scheme, the easier it will be for other countries to adopt similar policies.”

The long-term issues the respondents list as being important include emission reduction targets, allocation rules, and rules for new entrants in the market, and for installations that close.

However, there was no single clear-cut recommendation about how to deal with any of the issues, as stakeholder views differed considerably. One thing they did unanimously agree upon though, was that any decision about changes should be taken with plenty of lead time, not on an ad-hoc basis.

The Commission is obliged to review the way the ETS is working and report to the European Parliament by 30 June 2006. McKinsey and Co, and Ecofys have been employed to conduct the review.

David Hopkins

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