The European Emissions Trading Scheme (ETS) is the flagship initiative for curbing carbon emissions in the European Union. A new report says that the ETS is in danger not only of failing the objective for which it was set up – to secure reductions in emissions, but that it could become an environmental hindrance.
The environmental campaigning organization, Sandbag, claims that Phase II of the ETS will result in only 0,3% of reduced carbon emissions. The report blames the poor results on the free awarding of a billion surplus permits to industry and to combustion plant involved in manufacturing. According to the report the largest share of the industrial surpluses accrued to the cement and steel industries, the two sectors which have lobbied most aggressively to weaken the ambition of the scheme and to be afforded special protections from carbon prices which might harm their competitiveness. The report claims that there were distortions of competition on sectoral level: Heidelberg Cement has had a fivefold allocation advantage over its European competitors in the cement industry, while Salzgitter has had fourfold advantage against its European steel competitors. The most important recommendation of the report is to adjust Phase III caps to reflect historic emissions and to avoid contaminating the next phase with the over-allocation of the current one.