Carbon Market Data, a European consulting company, issued a data summary this week of the European Union’s Emissions Trading Scheme (EU-ETS) 2009 verified emissions reports. The five page report would be an excellent reading for a class on the EU-ETS, as well as a broader discussion of the effectiveness of cap and trade program to drive down emissions.
Among the key take-aways from the report:
- EU-ETS installations were “long” (i.e. their GHG emissions were below their allocated carbon allowances) by 57 million tons in 2009. Put another way, EU-ETS regulated installations emitted 3.3% less carbon dioxide than the number of allowances they received for free.
- Only three countries allocated less free allowances to their installations than they emitted: Germany (40 Mt), United Kingdom (16 Mt) and Denmark (1.5 Mt). Greece (0.4 Mt) and Slovenia (-0.1 Mt) were nearly at par.
- Unfortunately, most of the reductions in emissions appear to be attributable to the global recession;
- Of the 15 largest carbon dioxide emitting installations under the EU-ETS, 14 are power plants.
The latest figures from the EU-ETS could lead to a lively discussion on both the viability of the scheme, and more broadly cap and trade programs. Among the key questions:
- Given the fact that the drop in emissions has resulted in carbon allowance prices plummeting from more than 30 euros in 2008 to about 12 euros currently, can the EU-ETS serve as a driver for meaningful future reductions in emissions, especially in light of the fact that there are an estimated 142 million surplus permits currently in the system, many of which will be banked by regulated entities to use in future commitment periods.
- Does the surplus of permits on the EU-ETS market argue in favor of significantly strengthening requisite cuts in third phase of the EU-ETS? Is that a realistic political strategy in the midst of a recession?
- What other strategies should policymakers be looking at beyond cap and trade? For example, would a carbon tax fair better in the current environment? More of an emphasis on policies to drive technological innovation and adoption?