On 30-11-2010, the European Parliament’s ENVI Committee held an exchange of views with the Commission on emissions trading and air pollution. Details of the debate:
There was a good deal of concern over the Commission plans to set up an emissions trading scheme (ETS) for SOx and NOx rather than continue with them under the IPPC directive (integrated pollution preventionand control), and several members of the committee warned against upsetting a system that works.
Mr Francois from the European commission’s DG ENV explained the work carried out by the Commission on whether to apply an ETS to NOx and SOx on the grounds of cost effectiveness. He stated than an impact assessment had accompanied the revision of the IPPC directive, but they had decided in 2007 that more analysis was needed, particularly on setting a cap and allocating allowances.
This led to two studies in 2009, the first of which was completed in mid 2010. The latter looked at the impacts on the environment and economy and looked at 20 different scenarios. The results showed that an ETS could lead to the same level of reductions as the revised IPPC, but at a lower cost. The 2nd study was in its final stages and focused solely on the economic impacts, the choice of allocation method and how auction revenues would be used. It seemed to show that the impacts would be small. They were now in the final stages of analysis and hoped to have a decision soon. He stressed that this was not a top-up system but would replace the existing command and control system under IPPC.
Holger Krahmer (ALDE, DE), the rapporteur on IPPC, said he was against the Commission’s actions given that they had only just adopted the new IPPC and it needed time to prove it was effective. He could not see how an ETS could work in parallel with IPPC and asked why change something that was proving effective. It was true that the ETS had worked for some regions where used locally, but they were talking here about an EU wide system. How could they reconcile the different starting points of the member states, he asked. The Commission had always called for an integrated approach on IPPC, so he asked how this could be reconciled with ETS.
Kriton Arsenis (S&D, DE) asked if there should be a minimum price for Co2, NOx and SOx. He pointed to the recent failures of the ETS i.e. over the supply of allowances which needed to be avoided again.
Anja Weisgerber (EPP, DE) shared Krahmer’s concerns and agreed with him that emissions of SOx and NOx were falling and the new IPPC would help this continue. What is the added value of changing the system from fixed limits to a trading system, she asked.
Oreste Rossi (EFD, IT) warned against financial speculation in these markets.
Theodoros Skylakakis (EPP, EL) pointed to the recent problems with ETS and CDM (clean development mechanisms) in particular. He asked who was responsible for market irregularities in the ETS market. Co2 was global and suitable for an ETS, but SOx and NOx also have local parameters and so we should be very careful when changing this. We need to find a solution to the ETS before extending it.
Matthias Groote (S&D, DE) was surprised that Krahmer had been so negative.
Mr Francois stressed again that the ETS would replace the current system of BAT and would not work in parallel with it. Yes there may need to be some minimal safeguards to deal with local problems due to the introduction of ETS, and they would need to look further into this. While the scale would be EU wide, they had looked at regional scenarios and the key was to have EU wide rules. The larger the region, the more cost effective and that was the key value added. As to different starting points, they looked at systems that would achieve at least the same level of ambition as IPPC. They had not looked into target prices or minimum prices.As to the integrated approach, other permit conditions would be kept.
The Committee decided to take, at the same time, a question on the implementation of ETS tabled by Theodoros Skylakakis (EPP, EL) – please see text below:
The EU ETS is the largest multi-country, multi-sector greenhouse gas emission trading system worldwide. Taking into consideration:
(a) The misuse of certified emissions reductions on the EU ETS market, leading to the gross misuse of European consumers’ money to destroy HFC-23 gas at 70 times the actual cost of its destruction, thus creating huge windfall profits for a handful of companies around the world;
(b) The rise of HFC-23 levels in the atmosphere
(c) The pending Commission proposal for a measure to introduce further quality restrictions on the use of credits from industrial gas projects in the post-2012 EU ETS and the corresponding impact assessment;
(d) That in cases of possible dysfunction in relation to emission rights traded in the carbon market in Europe, such as manipulation of the market, lack of competition or cartel cases, there is not a single EU Authority among the institutions, responsible for monitoring, instigating and intervening in time against these dysfunctions while and the existing authorities do not have in their toolbox mechanisms in place to ensure that the market will run-smoothly;
Does the Commission intend to improve the implementation of the ETS legislation after 2013 (including the possibility of introducing a regulatory body for this newly created market) so as to avoid cases like that in the future?
Damien Meadows from the European commission’s DG CLIMA confirmed that as Hedegaard had promised in plenary, the Commission had now proposed a formal ban that would apply from the earliest possible date i.e. the 1st January 2013. They would also be coming out soon with a communication on market oversight. On auction revenues, he said 50% should be used by member states to tackle climate change, and member states would be reporting on this. On revenue from aviation, member states had agreed that this should be 100% to tackle climate change.
Theodoros Skylakakis (EPP, EL) and Gerben-Jan Gerbrandy (ALDE, NL) both welcomed the speedy action taken by the Commission on the HFC-23 issue but pointed out that this still left a 2 year loophole. Gerbrandy said as well as putting pressure on member states to act, they should ask BUSINESSEUROPE to call on its members to not get involved in this HFC loophole.
Damien Meadows replied that they had received stakeholder input into their decision, which was on their website, and that BUSINESSEUROPE had not supported their action, so he suspected the debate would continue.