EU Climate Policy Urgently Needs National Champions

The European Parliament's vote this week against delaying the release of some 900 million carbon allowances (known as the 'back-loading' proposal) is disappointing on several grounds.

The European Parliament's vote against back-loading of carbon allowances under the EU emissions trading system (ETS) shows that strong domestic action will be more important than ever now to support the growth of Europe's low-carbon industry and the international climate talks, says Nick Molho

The European Parliament's vote this week against delaying the release of some 900 million carbon allowances (known as the 'back-loading' proposal) is disappointing on several grounds.

Not only did it happen in what is supposed to be the EU's most progressive institution but the back-loading proposal that was turned down by MEPs also amounted to only a small first step at increasing the carbon price, which has hit an all-time low in the EU at around €3 a tonne of carbon dioxide.

In a recent report looking at strengthening the EU ETS, emissions trading organisation Sandbag argued that up to some 3.1bn carbon allowances (as opposed to 900 million allowances) needed to be withdrawn from Phase 3 of the EU ETS (which runs until 2020) to restore the credibility of the scheme.

It is also widely agreed that the EU ETS needs additional structural reforms to make it into an instrument that low-carbon investors could at least partially rely on in making their long-term investment decisions.

Add to this the decision by a large group of Conservative MEPs to vote against the back-loading proposal and ignore their own party's climate change policy and you could easily interpret this week's vote as marking an appalling withdrawal of climate leadership by the EU.

But with the clock ticking on the need to tackle climate change, build momentum towards the 2015 climate talks in Paris and get the EU out of its protracted economic slowdown, we have to keep on looking for solutions. Whilst strong European policy will be key in the long run, this week's vote in the European Parliament shows once again the importance of ambitious domestic climate and energy policies.

For foreign investors in low-carbon technologies, the vote will ring alarm bells about the EU's commitment to growing its clean tech industry. This is all the more the case given that today's vote follows several price crashes in the EU ETS since 2005 and the EU's previous failure to agree an increase in its emission reduction ambitions from 20% to 30% by 2020 which would have helped boost the carbon price.

If the EU's member states are keen to reap the economic growth benefits that organisations like the CBI show the low-carbon sector could provide, domestic action such as a strong Energy Bill in the UK is going to be more important than ever.

But with two major climate change summits taking place in the EU in the next two and half years (Poland in 2013 and France in 2015), domestic action by EU member states is also going to be key to build the significant momentum needed to deliver a global deal in 2015 that could credibly prevent the worst impacts of climate change.

Tuesday was a sad day for EU climate change policy but ambitious action in key member states could- and must - help the EU reclaim its leadership in the clean energy race and the fight against dangerous climate change.


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