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An influential Committee of the European Parliament voted today on rule changes in the emissions trading scheme post 2012. Since these rules will dictate how much pollution we are prepared to tolerate for a long time into the future it is important that they are got right.

Overall the outcome from today looks positive. We wrote to Committee Members in advance of the vote about three things:

– making the cap tighter,
– not letting proposals to sell permits to industry, rather than handing them out for free, be watered down, and,
– not allowing more use of international credits to replace action to reduce emissions here in Europe.

On the first, though the reduction target was not increased, yet, it remains the case that it will automatically increase (from a 20% to a 30% reduction by 2020) if and when a global deal is reached in the UN international negotiation process. Industry lobbying seeking to weaken this was defeated and also a new requirement that Member States prepare plans and projections for meeting the higher target was introduced.

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Plans for the sale of permits (known as auctioning) remain more or less intact with the power sector having to buy 100% from the start. There was a slight concession to give non-power sector industries 85% rather than 80% free at the start but all free allocations will still be phased out by 2020.

On the use of international credits the situation is complicated but it appears that there will be a slight increase overall in the total, but credits will have to pass additional sustainability criteria.

Overall the situation is not perfect but the significant industrial lobby which was seeking to water down the Commission’s proposals was by and large defeated and a few new positive things were included.

This is, however, far from the end of the process as the package needs to be voted on by the Council of Ministers, and then there is a process of negotiation between the Council, Parliament and the Commission before the whole things is put to a vote in Parliament in December, when they can either accept or reject it but not amend it. The Council vote is the next point of focus and Poland has been busy canvassing the support of other Member States to weaken the ambition in the scheme – specifically they want to reduce the use of auctioning. Apparently they have succeeded in securing support from a majority of votes but there will be counter lobbying and we hope the UK’s new Secretary of State, Ed Miliband, will get actively involved in canvassing support in the opposite direction.

The final package is important, not only to drive emissions reductions in Europe, but also because a robust policy will make the process of persuading other countries that we take our responsibility to lead the world out of this problem seriously, thereby increasing the chance of a global deal being agreed. Europe has placed a lot of faith in emissions trading – it is critically important that we show the world that this faith is justified, and for this policy to begin to deliver results.