Greenhouse gas allowances and long-term perspective of EU ETS:
- extracts from the exchange of views
EP Committee on Environment, Public Health and Food Safety
Lieu: Brussels, Belgium - EP
End production: 12/11/2012 First transmission: 12/11/2012
The EU Emissions Trading System (EU ETS) is a cornerstone of the European Union's policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively. The first and biggest international scheme for the trading of greenhouse gas emission allowances, the EU ETS covers some 11,000 power stations and industrial plants in 30 countries.
Launched in 2005, the EU ETS works on the "cap and trade" principle. This means there is a "cap", or limit, on the total amount of certain greenhouse gases that can be emitted by the factories, power plants and other installations in the system. Within this cap, companies receive emission allowances which they can sell to or buy from one another as needed. The limit on the total number of allowances available ensures that they have a value.
At the end of each year each company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances. The flexibility that trading brings ensures that emissions are cut where it costs least to do so.
The number of allowances is reduced over time so that total emissions fall. In 2020 emissions will be 21% lower than in 2005.
The ETS now operates in 30 countries: the 27 EU Member States plus Iceland, Liechtenstein and Norway. It covers CO2 emissions from installations such as power stations, combustion plants, oil refineries and iron and steel works, as well as factories making cement, glass, lime, bricks, ceramics, pulp, paper and board.
Nitrous oxide emissions from certain processes are also covered. Between them, the installations currently in the scheme account for almost half of the EU's CO2 emissions and 40% of its total greenhouse gas emissions.
Airlines joined the scheme at the start of 2012. The EU ETS will be further expanded to the petrochemicals, ammonia and aluminum industries and to additional gases in 2013, when the third trading period will start. At the same time a series of important changes to the way the EU ETS works will take effect in order to strengthen the system.
The EU ETS has put a price on carbon emissions and shown that it is possible to trade in greenhouse gas emissions. Emissions from installations in the scheme are falling as intended. The changes to be introduced in 2013, notably a single, EU-wide cap on emissions and the auctioning of an increasing proportion of allowances, will further enhance its effectiveness.
The success of the EU ETS has inspired other countries and regions to launch cap and trade schemes of their own. The EU hopes to link up the ETS with compatible systems around the world to form the backbone of a global carbon market. The European Commission has agreed in principle to link the ETS with Australia’s system in stages from mid-2015.
Only the original language version is authentic and it prevails in the event of its differing from the translated versions.
||Exterior view of the European Parliament building in Brussels
||General view of the ambience during the meeting (2 shots)
||SOUNDBITE (Spanish) Francisco SOSA WAGNER (NI, ES) rapporteur: "The European Union has been a pioneer in organising the ETS market. Other parts of the world, other continents; have turn to Europe and look at the experience we have gone through in this area as they seek to organise in a effective and fair way the ETS market."
||SOUNDBITE (English) Connie HEDEGAARD, European commissioner for climate action: "We, when it comes to the EU ETS, in order to create a positive atmosphere around this negotiation, we will stop the clock; you know this expression from international negotiations, we will stop the clock but off course that it would be time limited."
||SOUNDBITE (English) Connie HEDEGAARD, European commissioner for climate action: "It is about saying there is a chance now to get what we always wanted from Europe, namely a global agreement for aviation. We should use this; but other parts should also have to play bold and now they really have to engage in this international process; we very much hope that that can be productive and we will do whatever we can from the European side in order to achieve that".
||SOUNDBITE (English) Bas EICKHOUT(Greens/EFA, NL): "If we are going to look on the report this Wednesday, you are probably going to give an insight on six possible measures. But what is next? Is this another consultation phase for all the Member States that we already know where they are? Poland does not want to do anything; Britain wants to go to minus thirty. Do we need another round of consultations? We have communications, we have road maps, we can have reviews, we know where everyone is. We need a proposal from the Commission so all the countries can decide where they are. Now we know for some countries; but where is Germany? We do not know, they are not going to decide unless the Commission is going to propose something and then only Germany will speak out. Another consultation phase will not help".
||SOUNDBITE (French), Françoise GROSSETÊTE (EPP, FR): "I feel that you are seeking to take account of yourself over price speculation, which is somewhere surprising coming from the Commission because the Commission has been always bases its policy on the market and the freedom of the market. Here I get the impression that you are much unaccounted to that tradition. I am very unhappy about the lack of legal security because nobody knows what it would become in terms of energy costs at the time of crisis when it would be undesirable for energy costs to rise, and indeed at this time the prices are actually falling in the United States. So, the proposal for decision on back-loading seems a step to far for me".
||SOUNDBITE (English) Theodoros SKYLAKAKIS (ALDE, GR): "In this specific case I will tell you what will happen in Greece with your measures: electricity prices will go up, we will not be able to pay them, the electricity company would not be able to make investments for new plans. We are going to keep pumping, dirty through dirty plans up in the air, and we will pay expensive credits. Is this something that you really want to do? Please think about it.
||SOUNDBITE (English) Connie HEDEGAARD, European commissioner for climate action: "Let me remind you that when this parliament adopted the energy package in 2008 the estimated price was thirty euros, now we are down to 8,46 euros, it is almost one fourth."
||SOUNDBITE (English) Connie HEDEGAARD, European commissioner for climate action: "Where we were rather lonely only a few years ago having an emission trading scheme, the world is looking to Europe, they are actually adopting the same kind of market based mechanism, and we have to make our scheme work."
||Cutaways (3 shots)