Emissions trading system needs improving or EU will fail Kyoto

The EU could fail to meet its Kyoto targets unless it seriously improves the effectiveness of the emission trading scheme, and introduces stricter caps for the next implementation period starting in 2008, a report has warned.

Commissioned on behalf of WWF, the report found serious shortcomings with the performance of the ETS which will prevent the EU making an 8% cut in emissions as required under Kyoto.

The research focuses on the distribution of allowances among power companies and analyses the National Allocation Plans in six Member States representing 68% of EU emissions covered by the ETS: Germany, Italy, Poland, the Netherlands, Spain and the UK.

It found that there were insufficient targets for CO2 reduction in most NAPs and a lack of fairness between countries and sectors, with some countries making greater efforts to reduce CO2 than others.

In most countries the way of allocating emission allowances has failed to create incentives for investments in cleaner, more efficient technologies, it says. The NAPs and methods used to develop them also lack transparency, due to the poor level of public participation and “incomprehensible” ways of setting caps in most countries, it claims.

“The European ETS is the world’s most important policy to ensure a clean energy future and to combat climate change through deep cuts in CO2 emissions. But, at present, CO2 emissions in the EU are rising,” said Oliver Rapf, senior policy officer at WWF’s European Policy Office.

“The EU ETS has the potential to become a model for the rest of the world, provided it includes stricter caps on CO2 and better ways to allocate pollution allowances. This would create incentives to move away from dirty, CO2-intense coal power.”

According to the report, Italy would have to make the biggest cut in emissions allowances, closely followed by Spain.

“The ETS covers 46% of the EU’s CO2 emissions. This means that governments are negotiating almost half of Europe’s climate pollution when deciding for the second implementation phase. We urge the EU Member States to be ambitious and adopt tough caps on CO2 emissions to protect nature and EU citizens from dangerous climate change,” Mr Rapf concluded.

The report, The Environmental Effectiveness of the EU ETS: Analysis of caps, was conducted by ILEX Energy Consulting on behalf of WWF.

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