Emissions reduction: EU has no time to waste on climate action

Written by Ivo Belet on 6 October 2015 in Opinion
Opinion

Climate change policy not only benefits the environment, it also provides economic opportunity, writes Ivo Belet.

The new ETS will be a cornerstone of our climate policy and a strong driver of sustainable growth in Europe. From 2020 onwards, it will co-guarantee that we implement a binding target to reduce greenhouse gas emissions by at least 40 per cent by 2030. 

It also represents a clear message and stimulus to investors and industry: clean, sustainable energy is the future. 

The transition to low-carbon industrial and energy production is irrevocable, and it's crucial that we take the lead in this process to benefit fully as a technological frontrunner.


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The Commission's summer proposal is the second step in the overhaul of ETS. Step one was successfully concluded with an agreement on the introduction of a market stability reserve (MSR). 

MSR is a market-based correction mechanism that ensures more stable CO2 prices by automatically reducing the offer when there are too many CO2 allowances on the market and by putting allowances on the market in case of a shortage. MSR will start operating from 1 January 2019. 

The reform of ETS was prompted by the economic crisis. The slow-down in industrial activities led to a massive surplus of CO2 allowances, resulting in low CO2 prices and a slowdown of investment in cleaner energy. 

As ETS is the EU's main tool for reducing greenhouse gas emissions, it is vital the scheme stays on track in ensuring a gradual and balanced progress towards low-carbon production.

The Commission's new proposal (for phase four of the ETS, post 2020) involves a delicate balancing act between promoting a climate-change agenda and safeguarding the competitiveness of European industries. 

At all costs, we must avoid strangling our energy-intensive industries by making them less competitive with third countries that apply less stringent climate regulations.

We face a considerable risk of carbon leakage, which occurs when businesses transfer production to countries with weaker restraints on greenhouse gas emissions because of lower costs. 

We therefore welcome the carbon leakage provisions included in the new proposal. In order to reach our 2030 CO2 targets, the overall quantity of allowances will fall by 2.2 per cent each year from 2021 onwards. 

This means that the free allocated allowances will have to be reserved for those sectors that are genuinely exposed to the risk of carbon leakage.

The Commission rightly proposes focusing on the sectors at highest risk. The benchmark values will also stimulate the energy-intensive sectors to continue evolving towards energy-efficient production. 

Sectors that do not achieve the benchmark standards will have to buy additional CO2 allowances. The new benchmarks should be realistic and feasible.

The goal should be to ensure steady progress towards a low-carbon economy. Industry actors that invest in innovative, low-carbon production technologies must be rewarded; developing new technologies is essential to enable us to meet climate change objectives. 

It is absolutely vital that the new innovation fund, together with Horizon 2020 and the European fund for strategic investments, mobilises all available means to support and stimulate industrial processing towards cleaner and low emission production.

The European Parliament will soon begin working on the Commission's proposal. Parliament has made an excellent decision appointing me as its rapporteur on the market stability reserve and my colleague Ian Duncan (ECR) as central rapporteur.

The final outcome of this legislative process should be reform that truly stimulates European industry to 'decarbonise', while safeguarding our ambition to grow industrial activity from 16 to 20 per cent in the upcoming decade. 

We have no time to lose; economic powerhouses such as the US and China are waking up to the fact that climate action also offers economic opportunities.

An increase in renewable energy equals a decrease in imported energy; every euro invested in clean technology, saves three dollars' worth of imported fossil fuels.

The ETS (and later also the non-ETS) measures are, as Miguel Arias Cañete, European Commissioner for climate change and energy, rightly assesses, a powerful signal with regard to the December climate summit in Paris.

The UNFCCC's Secretary-General Christina Figueres recently confirmed to the European Parliament's environment committee that Europe is the strongest 'pull' factor and the leading partner in the run up to the upcoming Paris COP21 climate change summit. 

We must continue to convince other players that it is in their interests to cut emissions in the upcoming decade.

 

About the author

Ivo Belet (EPP, BE) is Parliament's rapporteur on the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme 

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