Under the Emissions Trading Scheme (ETS), industries, such as energy companies, steel and cement producers, are issued permits to emit carbon, purchasing extra permits when required and selling excess when possible. The ETS is currently suffering from a large oversupply of permits, lowering the price of carbon and undermining the incentive for industry to invest in cleaner production. The Ecofys report, The Next Step in Europe’s Climate Action: Setting Targets for 2030, finds that without EU intervention to fix the ETS, the extra seven per cent cut would be needed to ‘eat up’ the surplus of ETS carbon permits by 2030.
European ministers [1], business groups [2] and opinion leaders [3] have all highlighted that strong EU 2030 targets would help raise the record-low carbon price by increasing the demand for carbon permits. In a paper published in March, the European Commission stated 40% emissions reductions by 2030 are necessary. In May, the United Kingdom government proposed to set a 2030 emissions reduction target of 50 per cent [4]. Greenpeace is advocating a cut in excess of 55% [5].
In May, the European Council called on the Commission to table a concrete proposal so that EU leaders can debate 2030 climate and energy policies in March 2014.
Ecofys director of energy and climate policy Niklas Höhne said: “It is essential for the effectiveness of the EU’s emissions trading system that the trajectory of the EU’s greenhouse gas target until 2030 is set in a way that takes into account any pre-2020 surplus. Given the currently expected surplus, the 2030 target or the trajectory towards it would need to be significantly more stringent than otherwise.”
Greenpeace EU climate policy director Joris den Blanken said:“This report shows the 40 per cent 2030 carbon target put forward by the European Commission is woefully inadequate, especially given the impact of a failing ETS. The EU needs a stricter 2030 target if it wants to keep the ETS alive and avoid the most severe effects of climate change."
The Ecofys report also finds that the EU’s emission reductions by 2030 should be around 49 per cent of 1990 levels (midway between a range of 39% to 79%) [5]. However, these percentages do not take into account the effects of the current carbon permit surplus in the ETS and assume that the EU will deliver 25 per cent emission reductions by 2020 [6]. The report uses data on globally required emission reductions from the United Nations Environment Programme (UNEP), as well as different widely used approaches to calculate the share of the burden between different countries.
Considering these findings, Greenpeace calls on the European Commission, the European Parliament and EU governments to support a more ambitious domestic carbon emissions goal for 2030 of at least 55 per cent (49 per cent plus the 7 per cent adjustment for the ETS). This climate target must be part of a climate and energy package including a 45 per cent target for renewable energy uptake and a binding energy savings target. These three targets can together help encourage innovation, increase resilience to high and volatile fossil fuel prices, and strengthen the Emissions Trading Scheme.
Background
On 16 April, the European Parliament rejected a proposal that would have enabled the European Commission to temporarily curb the oversupply of permits in the ETS. The proposal was instead sent back to the Parliament’s environment committee. On 19 June, the committee will hold a new vote on the temporary carbon market fix, followed by a vote in the July plenary session of the parliament.
The surplus of unused permits now represents around 1.7 billion tonnes of carbon. With continued political opposition towards short-term intervention in the ETS, the surplus is expected to grow to 2 billion tonnes by 2020 (twice the volume of all of Germany’s annual greenhouse gas emissions). Record low carbon prices have damaged the credibility of the system and allowed a slide back to more polluting energy options, such as coal-fired power plants.
Ecofys report ‘The next step in Europe’s climate action: setting targets for 2030’: www.greenpeace.org/eu-unit/en/Publications/2013/Ecofys-The-next-step-in-Europes-climate-action-setting-targets-for-2030/
Notes:
[1] Joint statement on the ETS by nine EU ministers (7 May 2013)
[2] Business Europe considers 2030 policies as the real priority in the ETS fix debate (16 April 2013): http://www.businesseurope.eu/content/default.asp?PageID=568&DocID=31557
Energy companies call for 2030 climate and energy policies (23 February 2012): http://static.euractiv.com/sites/all/euractiv/files/Open%20Letter_FINAL-2.pdf.
[3] Financial Times editorial on fixing the ETS calling for 2030 targets (17 April 2013): http://www.ft.com/intl/cms/s/0/329f0798-a762-11e2-9fbe-00144feabdc0.html#axzz2Smkn1BUV.
[4] UK challenges EU to set emission reduction target to 50 per cent: https://www.gov.uk/government/news/uk-urges-europe-on-50-ambition-on-emissions-reductions.
[5] Greenpeace, 27 March 2013,‘Green paper kicks-off boxing match on Europe’s energy future’: http://www.greenpeace.org/eu-unit/en/News/2013/Green-paper-kicks-off-boxing-match-on-Europes-energy-future/.
[6] Effort-sharing approaches to combat climate change involve dividing cuts of greenhouse gas emissions between countries in a way that reflects their current as well as historical contributions to emissions, their level of economic development and other factors. For this report, five of the most commonly used international approaches were analysed. The 49 per cent figure represents the median of a range from 39 to 79 per cent identified by these five approaches (‘Contraction and Convergence’, ‘Common but Differentiated Convergence’, ‘Multistage’, ‘Greenhouse Development Rights’, ‘Triptych’) for EU countries. For more information, see www.greenpeace.org/eu-unit/en/Publications/2013/Effort-sharing-approaches.
[6] The European Environment Agency projects 25 per cent EU emission reductions in 2020, compared to 1990 levels, with implementation of existing and planned EU climate and energy policies: http://www.eea.europa.eu/publications/ghg-trends-and-projections-2012.
Contacts:
Joris den Blanken - Greenpeace EU climate policy director: +32 (0) 476 961 375, 
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