Future of EU emission trading scheme debated

The EU's climate trading scheme must be significantly amended from 2008 to increase the amount of industrial emissions covered while eliminating the smallest installations, according to Dutch environment minister Pieter van Geel.

Opening a three-day conference on global carbon markets in Amsterdam on Tuesday, Mr van Geel warned that diverging national interpretations of the scheme were penalising Dutch firms. His comments mark the first ministerial call for changes to the scheme, after similar appeals from industry.

Combustion plants operated by the Netherlands’ chemical industry were taking on emission caps while those in some other countries were not, Mr van Geel complained. He called for the chemicals sector to be fully included in the second phase of the scheme from 2008-12.

Meanwhile, installations with low emissions should be taken out of the trading system from 2008 to reduce administrative burden, said the minister. Forty percent of Dutch firms covered by the scheme produce just 1.5% of industrial emissions, he said.

European Commission officials insisted that the EU’s legislative timetable made it too difficult to make big changes to the scheme by 2008. Olivia Hartridge told the conference the Commission was “looking to finesse rather than significantly change the directive”.

For the same reason the notion of incorporating the aviation sector into trading from 2008 looks to be facing an uphill battle. Discussion of this prospect was “getting ahead of itself,” Ms Hartridge said. “We’re going to be exercising extreme caution when it comes to adding sectors.”

The conference, organised by analyst Point Carbon, offered a picture of the EU’s burgeoning carbon market two months after the scheme went live and a day after member states were meant to have activated the emission registries that form its central trading reference point.

According to participants, traded volumes already average between 500,000 and 1m tonnes of carbon dioxide allowances daily, and the figure is roughly tripling every quarter. The allowance price has recently risen above €9 per tonne, and the first “spot” trades have started to appear.

Companies are now “focusing more on trading than lobbying,” but still only around 50 of the 5,000 or so firms involved have dipped into the market. Most are buying and selling allowances to optimise the value of their holdings rather than to ensure compliance with emission caps.

The marketplace is driven by around ten brokers and five climate exchanges. Initial trading in the “derivatives” – such as futures and options – that are typical of mature markets could happen later this year. Norway is “very likely” to join the EU scheme soon, while Canada is unlikely to take the same step and Japan’s position is less clear.

Republished with permission of Environment Daily

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