EU ETS under heavy pressure

"The EU ETS is under heavy pressure, there is a real option it will die", warned MEP Peter Liese (EPP) during a conference on the future of EU Emissions Trading System (ETS). A reason to enhance it, say EU policy makers. An opportunity to formulate non marked based alternatives, say NGOs.

"Industry is not interested in a higher carbon price. They don't want to invest low carbon technology", Liese said. A reason to protect it better, he argued because "it's our only major instrument to mitigate climate change. There is no better alternative". Jutta Kill from FERN counters this view: "ETS has proven to be an ineffective instrument. It is not generating the needed investments and it doesn't reduce greenhouse gas emissions beyond conjectural waves. It's time for a real debate on policies that work"

Peter Liese's statement indicates that the future of the EU ETS – the cornerstone of the EU climate policy - is not as evident as often perceived. For Liese, Damien Meadows (DG Clima) and Peter Carter (European Investment Bank) the ETS has its loopholes and problems which could be fixed with some adaptations. E.g. by intervening in the supply side or excluding CDM offset projects outside the Least Developed Countries. But for them a market mechanism like the ETS remains crucial and "the only possible way" to solve the climate problem.

Peter Carter stated that he believed in markets and regulation and that it is the European Investment Bank's job to pave the way for the private sector in niche sectors that are still too risky in order to mainstream it.

Damien Meadows argued that putting a price is absolutely essential in order to make pollution more expensive.

NGOs disagree. According to Fabrina Furtado from the Network for Environmental Justice in Brazil, the loopholes are much more fundamental: "This system subjects Nature to an economic logic. We are no longer talking about Nature and rights but about assets, services and capital. The ETS establishes the right for companies to pollute while allowing destructive projects in the South."

"If you add up all the emerging design flaws you have a system designed to fail", Kill said. "It cannot be saved with a few quick fixes. We need an open debate on policies that truly value Nature outside of an economic logic. Sticking with what doesn't work because 'we have nothing else to replace them' is not good enough. Other options and policies exist. What seems to be lacking is the political will to explore and implement them, against vested interested where needed."

Counter Balance is a European coalition of development and environmental non-governmental organisations, formed in 2007 to specifically challenge the European Investment Bank. The groups involved have extensive experience working on development finance and the international financial institutions (IFIs) as well as campaigning to prevent negative impacts resulting from major infrastructure projects.