It is time to implement Kyoto at home.
Dear environment, energy and industry ministers of the European Union,
The announcements smade by the governments of Russia and Canada in Johannesburg mean that the Kyoto Protocol on climate change is likely to enter into force soon. With less than six years remaining until the beginning of the first commitment period, all industrialised countries must now focus their attention squarely on the implementation of domestic policies and measures designed to reduce their greenhouse gas emissions.
Current trends in greenhouse gas emissions show, however, that the EU as a whole and most Member States are presently not on course to meet their first Kyoto Protocol commitment period targets. While some Member State governments have unilaterally begun to put policies into place, many more have not and appear to be relying heavily on the adoption of EU wide policies and measures to help achieve their national emission targets.
One of the key components of this European climate policy framework is the planned Europe-wide “Cap-and-Trade” system, commonly referred to as “Emissions trading”. As this is currently at an advanced stage of discussion, we urge you to ensure that the present weaknesses are eliminated from the proposal and that the scheme’s environmental effectiveness is reinforced. Only a robust framework will guarantee that the sectors covered make a genuine contribution towards meeting the EU’s Kyoto commitments and allow the implementation of equivalent policies in other areas of the economy.
We agree with the Commission’s proposal to focus on a mandatory CO2 Cap-and-Trade System for all energy-intensive industries and the entire power sector with no exemptions. Allowing opt-outs would render the system useless, with the market dominated by sellers. However, the following elements must also form a key part of the scheme if it is to achieve its objectives:
Mandatory participation from 2005; voluntary participation will not promote the needed early investments or generate much practical experience of the policy.
Challenging and mandatory sectoral caps for all participants, established in a transparent manner and reflecting the large emissions reductions potentials in the energy-intensive industry and the power sector.
Uniform EU auctioning as the method for allocating permits, to provide an incentive for early action to improve energy efficiency and the use of renewable energy; if part of the allowances are to be freely allocated rewarding early action could be achieved by setting the base year at 1990, i.e. the Kyoto Protocol base year.
A rigorous and transparent compliance system that provides a clear incentive to timely compliance, based on a strong penalty for non-compliance.
The exclusion of Kyoto trading and project credits from EU trading. If either Hot Air or low quality project credits enter the system, the scheme will become almost worthless as a tool for domestic emissions reductions. In addition, no banking of allowances between the pilot (2005-7) and Kyoto commitment phases of the scheme should occur.
The system must ensure compatibility with other domestic measures such as ecological tax reform or support for renewable energy support and cogeneration. It should also not weaken the effectiveness of existing legislation on other environmental problems.
Indeed, it should be emphasized that in focusing on a Cap-and-Trade policy here, we are not implying diminished support for the many other important climate policies. Rather, we see a strong EU emissions trading system as part of an integrated package of policies and measures and do not want the opportunity presented by this legislation to be squandered.
During the year-long discussion of the Commission’s proposed directive, we have witnessed a concerted campaign of opposition to a Cap-and-Trade System by the industries of a number of Member States, while at the same time they and others have sought to water down almost every provision. This appears to be based on the idea that a failure to implement and emissions trading system will allow them to get away with “softer” policies.
This king of thinking is both misguided and irresponsible in the context of climate change. Current Kyoto commitments require that action be taken by these sectors now, but even these are only the very first step. Much deeper cuts must come after 2012. Emissions trading offers industries an opportunity to reduce substantially the cost of their contribution to meeting Europe’s Kyoto commitment and, if designed correctly, can provide a clear incentive to early investment for the future. The alternative can only be mandatory technology standards, carbon taxes and enforced reductions across the board; business-as-usual is not an option.
We believe that a uniform mandatory, credible,ambitious and transparent Cap-and-Trade System could become a cornerstone of European climate policy, and demonstrate the EU’s determination to deliver on its international pro-Kyoto rhetoric. A weak system, full of loopholes, would achieve just the opposite.
It is time for the EU to live up to its green credentials at home.
As representatives of their respective organisations
Director, Climate Action Network (CAN) Europe
International Climate Campaigner, Friends of the Earth Europe
Head of European Climate and Energy Policy Unit – WWF International
Head of Climate Change Policy RSPB/Birdlife
Contact: CAN Europe, rue de la Charité 48, 1210 Brussels, Belgium
Telephone: +32 2 229 5220 Fax: +32 2 229 5229