Wednesday 9 November 2005

The WWF report 'Carbon Countdown: Emissions trading and climate change' is based on independent research which analyses the shortcomings of Phase 1 of the EU Emissions Trading scheme (EU ETS) and outlines the improvements - both in environmental and economic terms - that should be made in the next phase.

"So far the UK government has failed to either significantly reduce climate polluting emissions or to give business the economic certainty they need through the Emissions Trading Scheme," said Andrew Lee, Director of Campaigns for WWF.

"This report shows that both the UK and the EU have a golden opportunity to take full advantage of the next phase of the EU ETS and really make a difference in fighting climate change," he added.

The report says the UK must cut CO₂ emissions from industry by a further 8.5 per cent (from the Phase 1 level) in the next phase of the EU ETS which starts in 2008. This would be crucial if the UK government is to meet its manifesto commitment to reduce emissions of CO₂ by 20 per cent by 2010.

For the EU to meet its climate change targets under the Kyoto Protocol and stated national targets, the emissions limits for the second stage of the scheme should represent a 8.7 per cent cut from the first phase across the six biggest polluting countries - Poland, UK, Germany, Italy, Spain and the Netherlands. This represents a cut of 127.5 million tonnes of CO₂ per year - equivalent to removing 30 million cars off the road each year.

The research did not only look at emission limits set by countries, but the rules that governments use to allocate allowances to industry. Such allocation methods can significantly impact the incentives needed to shut down old dirty inefficient power stations and invest in low-carbon fuels and technologies.

All six major countries analysed fell short of meeting all the criteria for environmental effectiveness and economic efficiency in Phase 1, failing to deliver sufficient emissions reductions, fair, transparent and simple plans for the scheme and providing the necessary investment signals to tackle climate change seriously. The UK was no exception.

Almost 12,000 industrial installations are included in the ETS which covers almost half of Europe's CO₂ emissions. The report recommends five key guiding principles that both the UK and the EU as a whole should follow to improve the effectiveness of the scheme. The report details policy measures that underpin these best-practice recommendations.

Matthew Davis, Climate Change Campaign Director at WWF, added: "The EU ETS is the first carbon trading market in the world and as such, can and must set an example for countries and regions across the globe to follow.

"The UK government, which has historically taken the lead on championing climate change issues, must set the standard by placing strict limits on emissions which will benefit both the environment and the economy."


Further information

WWF commissioned a consortium of consultants lead by ILEX Energy Consulting (UK) and Öko-Institut (Germany) to undertake a major independent review of the European Emissions Trading Scheme (EU ETS) in Phase 1 and for Phase 2 for six key countries in Europe: UK, Germany, Italy, Spain, Poland and the Netherlands.

Both reports analysed the first phase plans (NAPs) for these countries against criteria for environmental effectiveness and economic efficiency, and provided best practice recommendations for the second phase as well as key improvements for each country. The research also provided options for harmonisation across countries on various elements of the NAPs, and listed some key considerations for the scheme beyond the end of the second phase in 2012, both in terms of setting caps and the allocation rules of allowances.

The environmental effectiveness of the EU ETS: Analysis of caps
ILEX Energy Consulting, October 2005
This independent research focusses on the evaluation of the total number of emissions (caps) allocated by 6 Member States under the EU Emissions Trading Scheme. It includes a comparison of their plans in Phase 1 (2005-2007), provides best practice recommendations for Phase 2 (2008-2012) and options for the future after 2012.

The environmental effectiveness and economic efficiency of the EU ETS: Structural aspects of the allocation
Öko-Institut, 2005
This independent research evaluates the way that 6 key countries in Europe have allocated emission allowances in the EU ETS to individual installations (existing and new entrants), and interactions of such rules. It includes a comparison of their plans in Phase 1 (2005-2007), provides best practice recommendations for Phase 2 (2008-2012) and options for the future after 2012.

Carbon Countdown: Emissions Trading to combat Climate Change
WWF, 2005
This report sets out a vision for the UK and EU to ensure that the EU ETS is effective in economic and environmental terms, based on the findings from the WWF-commissioned research by lead authors ILEX Energy Consulting and Öko-Institut. It reviews the first phase of the scheme (2005-2007) and analyses its shortcomings and failings. The report provides best-practice policy recommendations of how the second phase (2008-2012) could be improved to make real and significant emissions reductions in the UK and Europe.

Cap levels for Phase 2 of European Emissions Trading Scheme
WWF, 2005
WWF provides quantified cap Phase 2 cap levels for the National Allocation Plans in the six Member States which were the focus of the EU ETS research: Germany, UK, Italy, Spain, Poland and the Netherlands. WWF applied the 'distance-to-target' approach, recommended in the ILEX cap analysis research as one best-practice way to express caps.