Reformation of EU Emissions Trading System Required To Reduce Green House Gases

The House of Lords EU Committee have produced a report calling for an overhaul of the Emissions Trading System (ETS), in order to meet ambitious greenhouse gas (GHG)reduction targets, since it is the main tool of the EU to reduce carbon emissions.

Although the EU ETS underpins UK and EU climate change policy, its effectiveness in delivering its aim (to reduce GHGs) remains unproven. The Committee strongly urges that the System be reformed, despite reservations from various member states. For example Poland have expressed opposition to auctioning of carbon permits, largely due to their heavy dependence on coal burning for power generation.

However the Committee have called for all allowances to be auctioned by 2013, and if exceptions are made to member states it will be on the condition that clean coal technologies are developed and trialed during the transition phase.

Concern has also been expressed over ‘carbon leakage’ – that is industries producing excessive emissions relocate to countries with less stringent regulations – although these industries are in the minority. The Committee recommended these industries be identified by 2009, but no decision will be made to allocate them ‘free emission permits’ – that is the freedom to continue polluting – until after the UN Climate Change Conference in Copenhagen in December 2009.

The Committee identified two risk areas regarding the ETS:

  • Industries will not comply with regulations
  • The ETS will not be joined up to global trading schemes and will therefore not fulfill their potential

Speaking about the report Lord Sewel, Chairman of the House of Lords EU Sub-Committee on Environment and Agriculture, said:

“Linking the EU ETS to other emissions trading schemes will be essential in order to maximise its environmental performance and minimise its economic costs. Worryingly, the prospects for such links appear to be poor.”

“Both the UK and the EU’s climate change policy is riding on the success of the ETS, which as yet is far from guaranteed. A timid deal at the summit of EU leaders could produce the worst of all worlds.”

The report will be available online shortly after publication at: