Cash for coal: power companies paid to pollute in EU carbon market | WWF

Cash for coal: power companies paid to pollute in EU carbon market

Posted on 07 April 2008
Massive CO2 emissions: The power sector is the biggest climate polluter. Tough caps on CO2 under a strong ETS can trigger a switch from dirty coal power to clean and efficient alternatives.
© WWF Germany / Andrew Kerr

Brussels, Belgium – Polluting power companies in just five European States could reap windfall profits equivalent to more than twice the GDP of Slovenia during the second phase of the European Emissions Trading Scheme, a new report revealed today.

Burning coal to generate electricity already accounts for about 1 billion tonnes of CO2 emissions per year within Europe – or about 20 per cent of all EU’s greenhouse gas emissions – and its grip on the European power sector looks set to increase.

But according to a new report commissioned by WWF, the EU Emissions Trading Scheme (ETS) continues to allow this heavily polluting form of energy to gain billions of euros from a scheme originally created to reduce emissions.

“There are currently plans to build 40 major new coal fired power stations in Europe in the next five years. These are expected to run for 50 years or more and could lock us into decades of soaring emissions” says Sanjeev Kumar, Emissions Trading Scheme Coordinator at WWF.

“Now more than ever, it is vital that the power sector is made to face up to the true cost of carbon, before the environment pays it for it.”

WWF commissioned Point Carbon, a world-leading provider of information and analysis on carbon markets, to carry out a study assessing the potential and scale of windfall profits to the power sector in the UK, Germany, Spain, Italy and Poland. Over the second phase of the scheme, which is set to run until 2012, the report shows that overall profits to the power sector in these countries could be as high as €71 billion.

The EU ETS is Europe’s flagship policy to address climate change and was created to put a limit on the amount of emissions caused by large industrial polluters. If emissions produced by a company involved in the scheme exceed agreed levels, that company will face heavy fines, unless it purchases pollution permits as a way of offsetting the excess. As a result, the allowances have both a carbon value – every tonne of CO2 is equal to one pollution allowance – and a monetary value. Currently though, EU Governments give companies many of these allowances for free.

“Handing free pollution permits to power companies is like handing them a cash bonus as, in the lack of international competition, they pass on the value of the permits to their customers” says Kumar. “Cheap profits for doing nothing is scandalous.”

The EU is currently negotiating how the ETS will work from 2013 onwards and has proposed that the power sector should have to buy all of the pollution permits it needs to cover emissions. WWF feels it is vital that this major contributor to climate change is held to account for its emissions and that such proposals survive the political process. Free handouts of pollution permits to the power sector must not be allowed to continue after 2012.

“The revenues from the sales and auctioning of the pollution permits need to be fully re-invested in climate change policies both in Europe and developing countries,” adds Kumar.

For further information:
Sanjeev Kumar, Emissions Trading Scheme Coordinator at WWF
Tel: +32 2 740 0920
E-mail: skumar@wwfepo.org

Claudia Delpero, Communications Manager at WWF European Policy Office
Tel: +32 2 740 0925
E-mail: cdelpero@wwfepo.org
 

Massive CO2 emissions: The power sector is the biggest climate polluter. Tough caps on CO2 under a strong ETS can trigger a switch from dirty coal power to clean and efficient alternatives.
© WWF Germany / Andrew Kerr Enlarge