Corporate Europe Observatory

Exposing the power of corporate lobbying in the EU

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EU ETS: failing at the third attempt

Emissions trading is the European Union’s flagship measure for tackling climate change, and it is failing badly. In theory it provides a cheap and efficient means to limit greenhouse gas reductions within an ever-tightening cap, but in practice it has rewarded major polluters with windfall profits, while undermining efforts to reduce pollution and achieve a more equitable and sustainable economy. The third phase of the scheme, beginning in 2013, is supposed to rectify the “teething problems” that have led to the failures to date.

This joint briefing from Carbon Trade Watch and Corporate Europe Observatory shows that:

- The EU Emissions Trading System (ETS) has failed to reduce emissions. Companies have consistently received generous allocations of permits to pollute, meaning they have no obligation to cut their carbon dioxide emissions. A surplus of around 970 million of these allowances from the second phase of the scheme (2008-2012), which can be used in the third phase, means that polluters need take no action domestically until 2017. Proposals to curtail this surplus were discussed in the context of the EU’s 2050 Roadmap, but have been watered down in response to lobbying from energy-intensive industries.

- Companies can use 1.6 billion offset credits in phases ll and lll, mostly derived from the UN's Clean Development Mechanism (CDM). Over 80 per coent of the offsets used to date come from industrial gas projects, which EU Climate Action Commissioner Connie Hedegaard admits have a "total lack of environmental integrity". The Commission delayed a ban in the use of these industrial gas offsets to April 2013 in response to lobbying from the International Emissions Trading Association (IETA) and others.

- The ETS is a subsidy scheme for polluters, with the allocation of permits to pollute more closely reflecting competition policy than environmental concerns. Power companies gained windfallprofits estimated at €19 billion in phase l, and look set to rake in up to €71 billion in phase ll. Subsidies to energy-intensive industry through the two phases could amount to a further €20 billion. This has mostly resulted in higher shareholder dividends, with very little of the windfall invested in transformational energy infrastructure.

- The third phase of the ETS will still see significant subsidies paid to industry, despite the auctioning of permits in the power sector. Industry lobbying has resulted in over three quarters of manufacturing receiving free permits, which could yield at least €7 billion in windfall revenues annually. Energy companies successfully lobbied for an estimated €4.8 billion in subsidies for carbon capture and storage (CCS), with a smaller amount for "clean" energy that includes agrofuels. In addition, the Commission is undertaking a review of its "state aid" rules which could see the granting of direct financial subsidies to companies claiming that the ETS damages their competitiveness.

- The allocation of permits according to performance “benchmarks” was supposed to encourage a fairer and more efficient division of responsibility for emissions reductions in energy-intensive sectors such as cement, steel, paper and glass. But industry has been allowed to influence the benchmarking. For example, CEMBUREAU (the cement industry lobby) was instrumental in choosing what to measure (“clinker” not cement) and how to measure it. The final agreement saw the adoption of a lax standard that was initially proposed by CEMBUREAU. This will result in a surplus of pollution permits for the cement sector, allocated in a way that rewards the continued use of dirty and outdated production methods.

-Aviation will be included in the scheme from 2012. The sector will receive 85 per cent of permits for free, and the projected carbon cost is far lower than the equivalent tax breaks for aviation fuel. Inclusion in the ETS applies only to CO2 emissions, which obscures the greater impact of contrails and other gases.


Put simply, the third phase of the ETS will continue the same basic pattern of subsidising polluters and helping them to avoid meaningful action to reduce greenhouse gas emissions.

 

Read the full briefing here:

Emissions trading is the European Union’s flagship measure for tackling climate change, and it is failing badly. In theory it provides a cheap and efficient means to limit greenhouse gas reductions within an ever-tightening cap, but in practice it has rewarded major polluters with windfall profits, while undermining efforts to reduce pollution and achieve a more equitable and sustainable economy. The third phase of the scheme, beginning in 2013, is supposed to rectify the “teething problems” that have led to the failures to date.This joint briefing from Carbon Trade Watch and Corporate Europe Observatory shows that:- The EU Emissions Trading System (ETS) has failed to reduce emissions. Companies have consistently received generous allocations of permits to pollute, meaning they have no obligation to cut their carbon dioxide emissions. A surplus of around 970 million of these allowances from the second phase of the scheme (2008-2012), which can be used in the third phase, means that polluters need take no action domestically until 2017. Proposals to curtail this surplus were discussed in the context of the EU’s 2050 Roadmap, but have been watered down in response to lobbying from energy-intensive industries.- Companies can use 1.6 billion offset credits in phases ll and lll, mostly derived from the UN's Clean Development Mechanism (CDM). Over 80 per coent of the offsets used to date come from industrial gas projects, which EU Climate Action Commissioner Connie Hedegaard admits have a "total lack of environmental integrity". The Commission delayed a ban in the use of these industrial gas offsets to April 2013 in response to lobbying from the International Emissions Trading Association (IETA) and others.- The ETS is a subsidy scheme for polluters, with the allocation of permits to pollute more closely reflecting competition policy than environmental concerns. Power companies gained windfallprofits estimated at €19 billion in phase l, and look set to rake in up to €71 billion in phase ll. Subsidies to energy-intensive industry through the two phases could amount to a further €20 billion. This has mostly resulted in higher shareholder dividends, with very little of the windfall invested in transformational energy infrastructure.- The third phase of the ETS will still see significant subsidies paid to industry, despite the auctioning of permits in the power sector. Industry lobbying has resulted in over three quarters of manufacturing receiving free permits, which could yield at least €7 billion in windfall revenues annually. Energy companies successfully lobbied for an estimated €4.8 billion in subsidies for carbon capture and storage (CCS), with a smaller amount for "clean" energy that includes agrofuels. In addition, the Commission is undertaking a review of its "state aid" rules which could see the granting of direct financial subsidies to companies claiming that the ETS damages their competitiveness.- The allocation of permits according to performance “benchmarks” was supposed to encourage a fairer and more efficient division of responsibility for emissions reductions in energy-intensive sectors such as cement, steel, paper and glass. But industry has been allowed to influence the benchmarking. For example, CEMBUREAU (the cement industry lobby) was instrumental in choosing what to measure (“clinker” not cement) and how to measure it. The final agreement saw the adoption of a lax standard that was initially proposed by CEMBUREAU. This will result in a surplus of pollution permits for the cement sector, allocated in a way that rewards the continued use of dirty and outdated production methods.-Aviation will be included in the scheme from 2012. The sector will receive 85 per cent of permits for free, and the projected carbon cost is far lower than the equivalent tax breaks for aviation fuel. Inclusion in the ETS applies only to CO2 emissions, which obscures the greater impact of contrails and other gases.Put simply, the third phase of the ETS will continue the same basic pattern of subsidising polluters and helping them to avoid meaningful action to reduce greenhouse gas emissions. Read the full briefing here:
 

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