Wednesday 7 June 2006

The European Emissions Trading Scheme is the world's first carbon trading market but some industry bodies and companies have claimed it will have devastating impacts on business.

WWF commissioned the Centre for European Economic Research (ZEW, Germany) to analyse all scientific studies and models available on the impacts of the ETS - which puts a limit on the amount of pollution from heavy industry - on competitiveness and employment. The analysis shows that dire warnings about the negative impacts from the ETS, as expressed by companies and industry associations from various sectors - lack justification.

"This report shows that most industry propaganda about the negative impacts of the European Emissions Trading Scheme is exaggerated and based on misconception and misinformation", said Matthew Davis, Director of WWF-UK's Climate Change Campaign. "In comparison with other measures, the EU ETS is clearly the most cost-effective option to reduce industry's impact on climate change."

The ZEW report shows that if countries were required to reach their climate change targets under the Kyoto Protocol without the flexibility to engage in any emission trading, this would result in a substantial increase in costs.

The report also suggests that aggregated job losses will be minimal even when compared to scenarios without EU regulation to reduce emissions. If economic impacts of the EU ETS are compared to impacts of other policies or regulation to meet Kyoto targets, the report rates the ETS amongst the best choices.

Countries are currently considering what limits on pollution they will set on industry in the second phase of the European Emissions Trading Scheme, which starts in 2008.

The UK is on track to meet its Kyoto target - to reduce greenhouse gas emissions by 12.5% per cent between 2008 and 2012 - and has said that the ETS is the key mechanism to meets its national target to reduce carbon dioxide emissions by 20 per cent by 2010. However, industry bodies such as the CBI have argued that to do this would put the UK at a competitive disadvantage to the rest of Europe.

Matthew Davis added: "The European Emissions Trading Scheme is the world's first true international carbon market, and it is vital that it is a success to show other countries how climate change can be tackled in a cost-effective way. The stakes are now incredibly high and member states must ensure that the second phase of the scheme delivers real cuts in emissions."