Tag Archives: chat
Parliament Committee Votes To Prop Up EU’s Ailing Carbon Market
Published 20 June 2013 The European Parliament’s Environment Committee has given its support to a compromise plan to boost the price of allowances on the EU’s carbon market. To become law, the proposal to temporarily remove some of the glut of permits that has weighed on prices still needs to win backing from a plenary session of the parliament next month in Strasbourg, and from EU member states. Traders said the market had already priced in a positive vote and allowances on the EU Emissions Trading System (ETS) fell by 3.6% to €4.53 a tonne short after the vote on Wednesday (19 June). After a defeat of the proposal in a full session of the European Parliament in April, the carbon price fell to a record low of less than €3 a tonne. British MEP Chris Davies, spokesman for the Alliance of Liberals and Democrats for Europe on the committee, indicated that the deal was far from perfect. In a statement after the vote, he said the plan “amounts to little more than a modest regulatory adjustment. It will maintain the operation of carbon trading but it will not provide a driving force to promote long-term low-carbon investments.” “We still need to agree on clear targets for Europe’s CO 2 reductions by 2030 to give investors greater certainty”, Davies said, “and we urgently need to secure a global agreement on measures to tackle climate change.” Green groups welcome deal Campaigners welcomed the yes vote, although environmentalists say the proposal is very weak and will have a limited impact on prices. But they hope it will be a stepping stone towards deeper structural measures, such as the permanent withdrawal of some carbon permits. “With this vote the Environment Committee has sent an important political signal: there is still commitment to the EU’s flagship climate policy,” said Rob Elsworth of the campaign group Sandbag. The carbon market plan was meant to be a quick fix for a market that has hit a series of record lows far below levels of €40 to €50 needed to drive a shift to lower carbon energy. The proposal has met fierce resistance from heavy industry, which complains about anything that drives up the cost of energy in difficult economic times, and from Poland, whose economy depends on coal. Germany has failed to take a stand ahead of elections in September. Carbon prices have reacted to the twists and turns of the debate, which has dragged on for years. Price swings, often in excess of 10%, have been exaggerated by the weakness of the market. POSITIONS: Eurofer , the European steel industry association, voiced scepticism about the vote, saying backloading was an “unnecessary intervention” in the EU carbon market and that greater attention should be paid to industrial competitiveness instead. “The EU emissions trading scheme is working as it should and Europe is well on track to meet its 2020 reduction targets,” says Gordon Moffat , director-general of the European Steel Association. “Instead of artificially raising carbon costs the Commission must address the competitive disadvantages for industry resulting from European climate and energy policies.” There were some modifications brought by the Parliament’s vote which Eurofer welcomed as satisfactory, however. These include provisions to reintroduce carbon allowances that have been withheld from one year to the next and a new financing mechanism to reserve 600 million allowances for the development of innovative low-carbon technologies. “Of course these modifications might be regarded as improvements compared to the original version. It seems that there is less risk now of emissions allowances being removed from the market permanently,” Moffat said. “Still, the proposal represents market interference as well as additional, artificial increases in energy prices. It would have been more helpful if all the political energy that went into meddling with the ETS would have been invested in policies that strengthen the competitiveness of European industry.” Oxfam , the global anti-poverty group, said the Parliament committee vote had “sent a signal to markets that EU climate policy is here to stay”. However, it criticised the compromise deal for weakening the European Commission’s original proposal “substantially”. Lies Craeynest , Oxfam’s EU climate change expert, said: “The upcoming structural reform of the ETS will need to be much more ambitious to help stave off dangerous climate change which threatens the food security of millions around the world. “The proposal for a new fund makes lots of sense but it should be aimed at funding real climate solutions at home and meeting the EU’s promises to help poor countries deal with climate change abroad, rather than propping up energy-intensive industries.” NEXT STEPS: 1-4 July : European Parliament to vote on proposal at a plenary session in Strasbourg. Continue reading
Backloading Is A Temporary Fix, The Emissions Trading Scheme Needs Bolder Reform
Policy Exchange’s Simon Moore makes the case for ambitious carbon market reform based on a demanding 2035 emissions cap By Simon Moore, Policy Exchange 19 Jun 2013 Later today the European Parliament’s Environment Committee will attempt to fix Europe’s flagship decarbonisation policy, the beleaguered Emissions Trading System. The proposal will see some permits (permission to emit a tonne of carbon) withdrawn temporarily from the carbon market. If this sounds familiar, it is because it tried exactly the same thing in April, only to be voted down by the full parliament. The committee has made a few tweaks, but the premise remains unchanged. Unfortunately, the premise is a political fudge masquerading as an important intervention. It tries to prop up the carbon price in the short term without addressing fundamental weaknesses of the current cap-and-trade system. The EU would be better served by turning its attention to fixing the long-term problems afflicting the ETS. If it fails to do so, then the backbone of Europe’s climate policy will remain fractured and Europe will have shown it is not serious about tackling climate change. Getting carbon pricing policy right is an important way to stop pumping more greenhouse gases into the atmosphere. The current scientific consensus argues for cuts in carbon emissions to mitigate risks from dangerous climate change. But many potential responses to climate change are expensive. Only a system that can identify the cheapest low carbon technologies can help keep those costs as low as possible. The ETS, which is designed to cap carbon emissions and then allow technologies to compete, should deliver such an outcome. Like all markets, it may lead to surprising and innovative outcomes. But it should find the cheapest way to a low carbon economy. As long it achieves the carbon cuts expected of it, does it matter whether it is achieved by better insulated homes, new nuclear power stations or wind turbines? And the cheaper the cost of decarbonisation, the more likely it is that the effort is politically sustainable and that other countries, notably the US and China, will follow Europe’s example. In a report we launched this morning, Policy Exchange calls on the EU to radically strengthen the ETS. That means setting an ambitious, carbon target that stretches out to 2035 giving investors clear, long-term direction. It also entails ditching the expensive renewable energy targets that have added unnecessary costs to European energy bills. Moreover, it means establishing a system that can respond to major changes in the economic, political or scientific circumstances. The slack under the current ETS cap has led to the current price having collapsed to €4/tonne, compared to about €20 just three years ago. The “business as usual” case used to set the cap turned out to be highly inaccurate in the wake of the financial crisis. Without any straightforward means of tightening the cap, Europe has resorted to the current highly politicised process for intervention. Recommendations stumble back and forth between the European Commission, Parliament and its committees. Each time it is lurches in a different direction, its political credibility is damaged. As a result, even coal, the most polluting of power sources, is having a mini-renaissance. Our report argues that an independent agency, modelled along the UK’s Committee on Climate Change is imperative if we are to avoid the current chaos. The body would make firm recommendations on when politicians should intervene (with politicians still making the final decisions). It should be set up with clearly defined rules and on a set timetable. Intervention would only be necessary if: macroeconomic circumstances changed significantly (as in the global financial crisis); if progress on an international deal failed (or was more ambitious than expected); or if the climate science changed. Crucially, such a body would not intervene just because the price was lower or higher than expected. If you want a market system, you have to trust the price signal. So long as emissions are being cut sufficiently, low prices should be celebrated. Such an agency would be better placed to navigate between the need to retain stability, giving longer-term investment signals and ensuring that decisions taken about its ambition keeps pace with world events. The EU is now contemplating a package of climate policies for 2030, with separate carbon reduction and renewables targets. The consultation, out only a few weeks ago, suggests a 40 per cent carbon reduction target and a 30 per cent renewable energy target. The Commission should be more ambitious on carbon and ditch the distraction of the renewable target. However, unless it fixes the ETS and trusts market processes to deliver the low carbon economy, all the political posturing in the world will not hide Europe’s empty words. Simon Moore is an environment and energy research fellow at Policy Exchange Continue reading
Global Fund Would Provide Effective Means To Fuel REDD+ Climate Program: Experts
Source: Wed, 19 Jun 2013 03:06 AM . Efforts to stop an increase in global temperatures can succeed if policymakers put in place a broad governance structure to oversee REDD+ from which money would trickle down through state-level funding to local projects, according to a new research paper . How best to govern REDD+ — a UN-backed framework for reducing emissions caused by deforestation and degradation — is politically disputed, particularly over what role financial markets and governments should play in the scheme. “ National Governance Structures for REDD+ ”, co-authored by Norwegian University of Life Sciences professors Arild Vatn and Paul Vedeld, examines four potential national REDD+ architectures that could be funded directly by a compliance market or by a global fund supported by both public and private sources. The options outlined in the research paper consider strengths and weaknesses of channeling economic support from the global to the country level through financial-market directed intermediaries, a separate national fund, a fund in a national state administration, or conditional budget support that would direct resources into local projects, national programs or sector policies. “The main idea is to open up the box and start to think about wider governance structures, rather than just thinking about it as a market, which has been the preferred mechanism up until now,” said Vatn at the “ Options for National REDD+ Architectures ” conference in Norway. “The way funding is organised will have a decisive impact on its capacity to deliver reduced carbon emissions, improved local livelihoods and protect biodiversity.” LAYING THE GROUNDWORK REDD+ assigns financial value to carbon stored in trees, creating a disincentive to cut them down. If policymakers were to set up a global fund paid for by carbon markets, it would mean that countries and businesses could receive carbon credit payments as Certified Emissions Reductions (CERs), by an issuance from the fund as an alternative to the international carbon market, Vatn said. Currently, carbon credits in the form of CERs are issued by the Clean Development Mechanism (CDM) Executive Board, approved under the rules of the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), an international treaty that sets binding obligations on industrialised countries to reduce emissions of greenhouse gases (GHG). They pave the way for investments in emission-reduction projects in developing countries. So far, because REDD+ is still in preliminary stages — referred to as the “readiness phase” — most of the $ 17.2 billion funding pledged for projects to protect standing forests has been made available to developing countries through the Forest Carbon Partnership Facility (FCPF) of the World Bank and the UN-REDD Programme . The funds are meant to create national capacity and strategies for REDD+ based on country-specific causes of deforestation. However, the scheme, intended to establish global climate policy, faces many challenges, according to Vatn. “In early discussions, everybody thought about developing compliance projects financed by firms like in the CDM,” Vatn said. “While we see some strengths with that, there are also some clear weaknesses, so we need to think about alternatives.” TRICKLE DOWN FUNDING OPTIONS The authors propose that REDD+ could be based on a CDM-like system, becoming in part a market-based carbon-trading system made up of buyers in the form of firms that need to reduce emissions and sellers who own — or have the right to use — tropical forests. “Given that a post-Kyoto agreement includes substantial cuts and accepts trade in emission permits, the market could raise significant revenues to invest in forest protection — this is seen as one of the strengths of a market-based solution,” Vatn said. “However, there are many problems with CDM, concerning such issues as additionality (the net positive difference resulting from economic development interventions) and transparency.” An international fund agreed by governments that would issue CERs to firms responsible for emission cuts, could be at least as effective in raising funding, he said, adding that it could also do away with problems encountered in the market-based solution by increasing transparency and including measures directed at lessening potential for fraud. Using an international perspective, several alternatives for a national REDD+ architecture could take shape. One alternative would be to set up a national fund outside of the state administration, where resources would flow from a global fund to national funds based on the level of reduced emissions from forests in each individual country. The national fund could be governed by an independent administrative board that would operate as an intermediary between forest owners — or users — and the international fund. The board could include representatives from the private sector, civil society and public authorities. Another option would involve a fund managed by the state administration. The money received would be allocated by a REDD+ -designated board made up of members from government, civil society and the business sector. It would function independently of a government budget, but have the capacity to use existing state administration to organize programs and coordinate among different sectors of society. While it has several of the strengths of the independent fund, an added advantage is that it would have the capacity to use existing public systems, and could ensure that such important sectors as agriculture and energy also get involved, Vatn said. The final option proposed by the authors would channel money from a global fund in the form of conditional budgetary support. While this solution would use existing administrative systems – it could also offer resources to make them more effective, and is expected to reduce transparency compared to both of the proposed national fund options. “While principally the best system for democratic accountability and potentially best at intersectorial coordination, the present situation concerning public misuse of money, may hamper its functionality in many countries,” Vatn said, adding that a separate fund within the present state administration may seem to offer the best solution in many contexts. “What stands out are the many challenges that organizing REDD+ at the national level will face,” the authors conclude, adding that their analysis of all options indicates the weakest option is the market-based system. ENHANCING TRANSPARENCY The main appeal of such a system has been its capacity to attract private funding, but it also raises the question as to whether international trades over government-owned forest lands are appropriate. In the market-based system, transparency can be reduced because traders can claim that information must be protected for business reasons, according to the paper. The analysis showed that it seems problematic to establish a system for combating deforestation and forest degradation that is separated from state decision-making and administrative bodies, leading the authors to suggest that considering local conditions is of paramount importance when choosing a feasible option. “We still need to define who are the carbon buyers, who are the sellers and define the relationships between them,” Vatn said, adding that all four funding models are open to corruption due to REDD+ delivering large amounts of money to developing countries, which could attract organizations and people who are after the money, rather than supporting the REDD+ ideals. “Obviously governance issues and rent-seeking behaviour — characterized by pursuit of the money — aren’t only important when it comes to the actual set up of a REDD+ system, but these factors are at play in most forest resource-rich countries, and can hinder any kind of major policy changes if actors from state bureaucracy and business profit from current business-as-usual”, said Maria Brockhaus, an economist and policy analyst in forestry and agricultural sciences at the Center for International Forestry Research (CIFOR). For more information on the issues discussed in this article, please contact Maria Brockhaus at m.brockhaus@cgiar.org This research is part of the Global Comparative Study on REDD+ , which forms part of the CGIAR Research Program on Forests, Trees and Agroforestry . It is supported by the Norwegian Agency for Development Cooperation, AusAid, the UK Department for International Development and the European Commission. Continue reading
