Energy ministers call for overhaul of EU ETS

29th October 2013

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Ed Davey is one of 13 European energy ministers calling for the urgent reform of the emissions trading scheme (ETS) and for the EU to pursue more ambitious climate policies to 2030

The “huge surplus” of EU ETS allowances caused by the economic downturn has resulted in a slump in the price of carbon that is hampering investment in low-carbon technologies and risks locking Europe into a high-carbon future, according to a group of EU ministers.

The “green growth group” of cabinet ministers, which includes energy and environment ministers from the UK, Germany, France, Spain, the Netherlands and eight other EU states, has outlined three actions that European policymakers must urgently embrace if the bloc is to make a cost-effective transition to a low-carbon economy.

In addition to reforming the ETS to push up the cost of carbon, the group wants the European Commission to set target-based energy and climate change policies to 2030 and commit the bloc to an “an ambitious emissions reduction” at the UN world leader’s climate summit next autumn.

“Only by acting together and by showing leadership can we deliver the significant economic benefits that are possible in tackling climate change,” said Davey.

“Businesses and investors are telling us that the EU needs to get its act together and that we need to urgently agree a 2030 climate and energy framework and reform the EU ETS. Only then will investors have the confidence to put the billions into low carbon that we need.”

The group’s report, Going for green growth, recommends removing the excess ETS allowances, arguing that this would increase the price of carbon and generate “significant extra revenue for national treasuries”. This additional money for national exchequers could then be spent either on decarbonisation measures or tackling national budget deficits, says the report.

It warns that without effective EU-wide policies to drive investment in low-carbon technologies, national governments are likely to initiate their own independent policies, which could confuse the regulatory landscape, undermine the EU’s market and increase costs for businesses.

The ministers also argue that an EU supergrid, which would allow electricity generated in one country to be used in another, will be “vital” in ensuring cost-efficient decarbonisation of the bloc’s energy supply.

According to the report, creating a fully interconnected electricity market across Europe would be worth an additional €40 billion a year to the EU economy by 2030. It also states that the widespread deployment of smart technologies could generate a further €5 billion in savings, by encouraging more energy-efficient behaviour.

The ministers’ recommendations were welcomed by Christiana Figueres, secretary general at the UNFCCC: “Implementing clear policy frameworks that incentivise low-carbon, price carbon and lay the groundwork for emission reduction commitments in 2014 are the greatest contributions governments can make towards the new, universal 2015 climate agreement,” she said.

“Forward thinking businesses clearly have an interest in supporting political action toward low-carbon, which will allow them to thrive in the coming green economy. This is the type of leadership we need to give the world our best chance of meeting the climate challenge.”

The ministers’ call for a joint European approach to energy and climate change came just days after the UK government launched a review of the impact of European policymakers on national energy policies.

The review is the latest in the government’s “balances of the competences” programme, which is fulfilling the coalition’s promise to examine the UK’s relationship with the EU and the balance of power in setting legislation and policy direction.

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