EU States 'will lose out unlessCO2 is cut by 30%'

Sticking to a 20% CO2 reduction target for 2020 will maintain the carbon price at low levels compared with earlier predictions, making governments lose billions of euros in revenues from emissions trading, according to a new report.

Published on Thursday by NGO CAN Europe, the report is the latest in a series of analyses showing the benefits of moving to 30%. EU states would lose almost E70bn during 2013-20 because CO2 is predicted to be worth only around E16 per tonne.

This is nearly half of what the European Commission was predicting in 2008, CAN Europe notes. Making deeper emission cuts is the only way to bring the carbon price back to what was initially predicted (E30/tonne), according to its report.

There have been concerns that going beyond 20% would lead to a reduction in revenues from the auctioning of carbon allowances. But CAN Europe contests this, showing that a higher price would more than make up for greater scarcity in the EU's emissions trading scheme. For example, Germany would earn an extra E15bn.

Tomas Wyns of CAN Europe challenged the idea that the debate over whether to move to 30% was at a standstill, although he agreed that the current political climate was not favourable. There are many advocates in the EU including ministers and there is a constant flow of studies providing new angles on potential benefits, he said.

A commission analysis http://www.endseurope.com/25602?referrer=bulletin&DCMP=EMC-ENDS-EUROPE-DAILY leaked to the media earlier this week shows that the best economic way forward would be to cut emissions by 25% in 2020, followed by a 40% reduction compared with 1990 levels ten years later and 60% in 2040.

The analysis warned that moving away from this trajectory "could lock in carbon intensive investments" and "significantly higher overall costs over the entire period". But it is not clear what a 25% cut would mean for the emissions trading scheme.

The commission says that up to 800 million carbon allowances could be taken out from the scheme during 2013-20 to tackle the over supply of EUAs during the second trading phase and "restore the reward for low carbon investments". But the total figure of 1.4 billion EUAs http://www.endseurope.com/23859?referrer=bulletin&DCMP=EMC-ENDS-EUROPE-DAILY that it previously said could be wiped out is not mentioned.

This seems to be because the EU executive believes that the rest of the carbon reduction effort could be achieved through energy efficiency. However, the analysis does not specify what measures would have to be taken. If this is not enough, it is possible that the ETS's emission cap during phase 3 would have to be tightened.

Follow-up: CAN Europe report

http://www.caneurope.org/media-center/295-enhanced-climate-action-in-europe-is-imperative-for-generating-jobs-growth-and-energy-and-climate-security.

The report is based on Oko Institute calculations

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