The Greenpeace airship flies over Nováky, Slovakia, in October, bearing the message: "if you can read this, you are breathing coal pollution."
The EU's Emissions Trading Scheme (ETS) has been suffering from a low carbon price and an excess of emission allowances which have in turn reduced EU government revenues and hampered the scheme's ability to cut carbon emissions from Europe's industrial sector. As a response to this situation, the European Commission is expected to release a plan on 14 November to curb the oversupply of emission allowances.
The report, based on modelling by the German-based Öko-Insitut, shows that temporarily withholding emission allowances – a step known as 'backloading' – would increase carbon market revenues by 7 percent or €7 billion between 2013 and 2020, compared to a scenario without intervention. In addition, the report finds that with carbon market measures delivering 25 to 30% greenhouse gas emission reductions by 2020, auctioning revenues would increase between 73 and 91% (€62 - €78 billion for 2013-2020). Several EU member states, including Germany and Latvia, decided to use ETS auctioning revenues for supporting innovation and green technology.
Sam Van den plas, Climate Policy Officer at WWF European Policy Office, said: "Without a stronger carbon market EU governments lose the opportunity to send an economically efficient price signal to Europe's biggest climate polluters. What the EU needs is a combination of emergency and structural measures to fix its carbon market. EU governments need to smartly invest the auctioning revenues in cleaner and more competitive production."
The report also demonstrates that the effects of ETS intervention on the competitiveness of European industries – such as steel and cement – are negligible, as many sectors continue to benefit from free emission allowances. Finally, the report criticises the Commission's 2009 assessment of the ETS' impact on industrial competitiveness (known as carbon leakage), arguing that it is based on outdated parameters.
Joris den Blanken, Greenpeace climate policy director, said: "Despite Europe's carbon market, coal burning is on a record-high. The carbon market is not working and EU leaders need to fix it before it becomes irrelevant. This report demonstrates that a functioning carbon market can bring huge financial benefits without harming European industry."
WWF and Greenpeace support backloading as an important temporary solution to fix the ETS and call on the EU to withhold at least 1.4 billion emission allowances. However, backloading must be followed urgently by structural measures to strengthen the ETS, in line with cutting domestic EU emissions by 30%, compared to 1990 levels.
Notes to editors:
1. For the full report, including an executive summary in English and German, see: http://www.greenpeace.org/eu-unit/en/Publications/2012/The-cost-of-inaction/
A domestic 30% EU emission reduction objective for the EU ETS implies in total 2.7 billion emission allowances would need to be retired from the next trading phase (ie. a reduction of the cap by 2.7 billion EUAs between 2013 and 2020). This can be achieved by a combination of a cancellation of emission allowances and an increase of the annual linear reduction factor.
For further information:
• Sam Van den plas – Climate Policy Officer at WWF European Policy Office, +32 485 95 22 01 , 
• Joris den Blanken – Greenpeace EU climate policy director: +32 476 96 1375 , 