The script of former Vice President Al Gore's recent Climate Reality global web event started with the words, "Somewhere there may be an Earth where . . . . . . isn't happening" and went on to fill the blank with a series of climate events currently underway, then concluded, "But not here, not this Earth, we have to deal with reality."
Reality was also an issue at two separate events that I attended this week in Europe, an IEA/IETA/EPRI Emissions Trading seminar in Paris and the annual Platts European Emissions Markets Conference in Brussels. I was also a keynote speaker at the latter. At the Brussels event the EU Commission spoke about the development of the EU Emissions Trading System, the progress towards Phase III and even noted that the current low carbon price in the EU was a suitable reaction to the recession and that the system had responded as necessary. In the Paris event, which was under the Chatham House Rule, we heard a similar story and a description of the expanding discussions between the EU and other governments with regards linkage of emissions trading systems. One might have come away from these thinking there is an Earth where rapid progress is being made in building carbon markets and using them to quickly and effectively reduce emissions on a global basis.
There may be an Earth which is doing this, but very unfortunately it isn't this one. It should be, it needs to be, but we have to deal with reality.
- The assumption that neither the EU Energy Efficiency Target (the focus of the upcoming Energy Efficiency Directive) or the even higher profile Renewable Energy Target will be met. Of course if renewable energy supply surges as it has done in recent years thanks to the efforts in Spain (equivalent to 800 million allowances), the 400 million allowance short position will quickly evaporate.
- The assumption that the aviation emissions trading proposal will go into full operation, with both incoming and outgoing flights covered by an expanded ETS. Their analysis reckons aviation to be some 400 million allowances short through to 2020, so if this important add-on to the ETS doesn't happen or is significantly delayed, then the whole ETS is flat through to 2020. Although there is no final ruling by the European Court of Justice, this week the Advocate General did express the view in favour of ETS implementation in response to the court challenges from a number of international airlines.
- Long term incentive to drive technology development, in particular carbon capture and storage (CCS) and renewable energy.
- Early trigger to begin the major task of decarbonising the power sector with a particular need to guide investment into the 2020s.
- Assisting developing countries in beginning the task of emissions reduction
- Demonstrating the effectiveness of carbon pricing through an ETS with the goal of encouraging similar systems elsewhere.
- Supporting the carbon market approach agreed under the Kyoto Protocol.
Over a number of recent blog postings I have set out the case for the removal of allowances in the ETS. At the Platts conference I spoke about the same thing using the linked presentation below. There is no challenge here to the ETS as such, it is a fully functioning, well designed emissions trading system, but it has been hit from all sides by a series of events.
The time to correct this is now. That is the new reality the EU Parliament and Commission must face up to.
Click here to see the presentation.
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