Corporate Europe Observatory

Exposing the power of corporate lobbying in the EU

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Letting the market play

'Letting the market play - corporate lobbying and the financial regulation of carbon trading' examines the reforms being proposed to regulate carbon trading following a series of frauds, and looks at the role of the corporate lobbies in trying to influence this process.

This report outlines a series of reforms to the regulation of carbon trading in response to fraud and the financial crisis, and financial sector efforts to disrupt them. It shows that:

- The European Commission adopted a deliberately light touch approach to regulating its Emissions Trading System since its launch in 2005. A series of fraud cases made this position untenable.

- The Commission has proposed measures to tighten security, which was previously so lax that it was easier to become a carbon trader than to open a bank account. However, the new rules would also cover-up evidence of fraud and gaming by hiding carbon permit serial numbers. The Commission’s intention is to re-issue stolen permits, opening an additional hole in the scheme’s accounting for emissions.

- The Commission has belatedly identified carbon as a commodity that is susceptible to excessive speculation. Leaked drafts of the Market in Financial Instruments Directive (MiFID), a set of rules governing European financial markets, are set to be extended to include carbon trading.

- New regulations on carbon trading have been consistently opposed by financial services lobbyists. For example, in January 2011, the European Commission halted trading on a key part of the carbon market after the latest in a series of large fraud cases was uncovered. Less than a month later and with the suspension still partly in place, the International Emissions Trading Association (IETA, the main carbon trade lobby group) were privately insisting to Brussels officials that “there might be no need to regulate this market.” This report documents how financial sector lobbying has been driven by a desire to find new opportunities for carbon market speculation by whatever means are necessary.

- Although the lobbyists look to be losing some of these battles, plenty of loopholes remain in the financial regulation of the carbon market. More fundamentally, emissions trading introduces speculation by design and has failed to meet its stated objectives. There is a need to de-financinalise climate policy.

Read the full report here.

Attached files: 
This report outlines a series of reforms to the regulation of carbon trading in response to fraud and the financial crisis, and financial sector efforts to disrupt them. It shows that:- The European Commission adopted a deliberately light touch approach to regulating its Emissions Trading System since its launch in 2005. A series of fraud cases made this position untenable.- The Commission has proposed measures to tighten security, which was previously so lax that it was easier to become a carbon trader than to open a bank account. However, the new rules would also cover-up evidence of fraud and gaming by hiding carbon permit serial numbers. The Commission’s intention is to re-issue stolen permits, opening an additional hole in the scheme’s accounting for emissions.- The Commission has belatedly identified carbon as a commodity that is susceptible to excessive speculation. Leaked drafts of the Market in Financial Instruments Directive (MiFID), a set of rules governing European financial markets, are set to be extended to include carbon trading.- New regulations on carbon trading have been consistently opposed by financial services lobbyists. For example, in January 2011, the European Commission halted trading on a key part of the carbon market after the latest in a series of large fraud cases was uncovered. Less than a month later and with the suspension still partly in place, the International Emissions Trading Association (IETA, the main carbon trade lobby group) were privately insisting to Brussels officials that “there might be no need to regulate this market.” This report documents how financial sector lobbying has been driven by a desire to find new opportunities for carbon market speculation by whatever means are necessary.- Although the lobbyists look to be losing some of these battles, plenty of loopholes remain in the financial regulation of the carbon market. More fundamentally, emissions trading introduces speculation by design and has failed to meet its stated objectives. There is a need to de-financinalise climate policy.Read the full report here.
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It's almost six months since EU Climate Commissioner Miguel Arias Cañete claimed to have negotiated an historic global deal to tackle climate change at COP21in Paris. The 3 May also marked a year and a half of Cañete being in the job. However, he and his his boss, Vice President of the Commission Maros Šefčovič, continue to give privileged access to fossil fuel players trashing the climate, who have enjoyed eight meetings to every one involving renewable energy or energy efficiency interests since the Paris deal was signed. Rather than a change of direction, it's business as usual for the European Commission following the Paris Agreement, which is great news for Big Energy but a disaster for those serious about tackling climate change.

In the middle of May over 4000 people from all over Europe gathered in the Lusatia region in Eastern Germany. The plan? To block a Vattenfall-owned opencast lignite mine.

In light of the ITRE Opinion and forthcoming discussion on the proposed Directive to reform the Emissions Trading System (and “enhance cost-effective emission reductions and low-carbon investments”), CEO offers comments. 

Ultimately, revisions of this sort are nowhere near enough. The new ETS Directive requires some "damage limitation." But it is also a time to reflect on the need to move beyond emissions trading at the heart of EU climate policy. There are many ways to achieve this: http://corporateeurope.org/climate-and-energy/2014/01/life-beyond-emissi...

A revised Emissions Trading Directive is like red meat for the hungry pack of lobbyists that work the corridors of Brussels’ political institutions. Even minor differences in how pollution permits are handed out can result in profits or savings of millions of euros to big polluters.

A few weeks after the May coup against Dilma Rousseff by conservative parties backed by the country's largest corporations, Brazil's “interim” government, led by Michel Temer, signed an emergency loan to the State of Rio de Janeiro to help finance infrastructure for the 2016 Olympics. The bailout was conditional to selling off the State's public water supply and sanitation company, the Companhia Estadual de Águas e Esgotos (Cedae). 

When we interviewed City Councillor and chair of Rio’s Special Committee on the Water Crisis Renato Cinco, in December 2015, he was already warning against such privatisation threats and provided important background information on the water situation in Rio.

Never before has a former European Commission official been criticised as much for his post-EU career as ex-Commission president Barroso upon joining infamous US investment bank Goldman Sachs this summer. Citizens are outraged and evidence already points towards a gross violation of the EU Treaty.

Following the high-level appointment of former European Commission President José Manuel Barroso to Goldman Sachs, NGOs have launched a petition demanding stricter rules for ex-EU commissioners’ revolving door moves.

Corporate Europe Observatory's new report 'A spoonful of sugar' illustrates how the sugar lobby undermines existing laws and fights off much-needed measures that are vital for tackling Europe’s looming obesity crisis.

 
 
 
 
 
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The corporate lobby tour