Emissions trading to feature prominently in EU climate change policy

The Communication outlines the areas where EU policy will be expanded and/or revised in order to facilitate reductions in carbon dioxide emissions. Initially, policy changes will focus on:

• energy
• transport
• industry
• the Kyoto flexible mechanisms

By listing those areas where policy measures to reduce greenhouse gas emissions will be introduced, the EC also points out the failure, thus far, on the part of most member states to establish energy taxation, such as the UK’s Climate Chance Levy (see article in the UK section of this edition of edie news).

In addition to policy improvements, the EC sees emissions trading as forming an important, ‘cost effective’ aspect to Kyoto compliance. Conceding that Europe has little knowledge or experience in emissions trading, the EC has proposed an internal EU-wide emissions trading system to begin in 2005.

The trading system would not include all industrial sectors, and the EC foresees the option for member states to delay entry into the trading if they feel they’re not ready. Nevertheless, the aim of the trading system will be to test emissions trading within the EU with a view to integrating it with international Kyoto emissions trading that will begin in 2008.

Eurelectric, the association that represents European electricity generators, believes the EC’s proposals on emissions trading are generally sound. “We’re very encouraged – after all the hard work we’ve put into setting up simulated emissions trading,” John Scowcroft of Eurelectric told edie (see related story). Scowcroft says that a harmonised EU emissions trading system sounds like a good idea, but that the real issue is what will be agreed at COP6 (the sixth meeting of the Council of Parties to the Kyoto Protocol, to be held in November) on emissions trading. Essentially, the question is whether countries signed up to reduce their emissions will be allowed to meet their entire Kyoto reduction targets through international emissions trading.

Eurelectric does not share the EU’s position that countries must meet at least 50% of their reduction targets through “domestic reduction efforts”.

The EC is seeking views on the structure of the European emissions trading system. At this stage, it is envisaging a system designed “in such a way as to be open to gradual extension” but initially confined “to large fixed point sources of carbon dioxide, where monitoring and supervising of the system is more feasible”. Possible industrial sectors to participate in the emissions trading from the outset include:

• electricity & heat production
• iron & steel
• refining
• chemicals
• glass, pottery and building materials (including cement)
• paper & printing (including paper pulping)