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Has the Impotent ETS Finally Been Abandoned by Europe?

By Joao Peixe | Sun, 12 May 2013 00:00 | 0

The European Parliament had a key vote on the 19th of April to determine the fate of the EU Emissions Trading Scheme (ETS). Angela Merkel, the German Chancellor, had the power to save the ETS with but a phone call, and yet ‘the climate chancellor’ decided to let the impotent scheme wither and possibly die.

This could potentially have wide ranging consequences for renewable energy expansion in Europe.

 Regine Günther, from the World Wildlife Fund Germany, one of Germany’s biggest environmental organisations, stated that the 19th of April vote “was a hugely important vote for climate policies and for renewables themselves across Europe,” and now Europe’s renewable energy future is uncertain.

Launched in 2005, the ETS was designed to be the centrepiece for Europe’s climate policies, the beacon that led the way to a green economy.

Related article: Politics Still Rules the Climate Change Debate in the US

The goal was for a cap and trade system, which limited the amount of emissions that organisations could release, and then assigned tradable permits to represent those emissions. The idea was that a company that used dirty energy would produce more emissions, exceeding their allowance and then have to buy more, making dirty energy sources expensive. Companies using clean energy would use less than their allowance of permits, and be able to sell the surplus to make clean energy cheaper.

Problems emerged from the outset as far too many permits were offered, producing a surplus to demand which meant that prices crashed, making fossil fuels cheaper than clean energy sources. The whole issue was then compounded by the economic recession which saw demand for energy fall, reducing even further the demand for carbon permits.

Ms. Günther explained that, “because of the way the electricity market in Europe is structured, the lower the price of carbon, the more you pay for renewables, and thus the more carbon-intensive fuels you have in the mix. This is why Europe is burning so much coal now. It’s a fatal spiral downwards.”

She also noted that, “carbon emissions have to have a price if the Energiewende is going to succeed in Europe.” Only time will tell whether a new scheme is suggested in the future.

By. Joao Peixe of Oilprice.com

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