WWF claims carbon market rewards generators and punishes public

Monday, April 14, 2008

Environmental campaign group WWF has denounced the latest round of the EU's Emissions Trading System, saying its heart is in the right place but 'design faults' mean it rewards those burning the most coal.

The scheme, designed to cut the continent's carbon emissions, will perversely provide a windfall for the biggest emitters, says the WWF.

The conservation charity asked carbon market analysts Point Carbon to estimate the windfall profits in five European countries - the UK, Germany, Spain, Italy and Poland - over the current five year phase of the scheme.

The subsequent report suggested the figure could be anywhere from Euro 23 billion to Euro 71 billion.

In a nutshell, electricity generators can benefit from the scheme when energy prices rise to take into account the cost of carbon emissions but companies receive the bulk of the necessary allowances free of charge under the National Allocation Plan of the country they are operating in.

"Windfall profits are highest in countries that have a high level of pass-through of CO2 costs into wholesale power prices, countries with emissions intensive (coal) plant setting the price the majority of the time, and countries that allocate the highest percentage of free allowances to the power sector," Point Carbon said in the report.

WWF has always supported the EU ETS as a crucial mechanism to tackle emissions within the EU, but notes that careful implementation is required for such schemes to achieve their potential.

"We have long been critical of the ETS design faults that provide cash for coal in the name of emissions reductions", said Sanjeev Kumar, WWF Emissions Trading Scheme Coordinator at WWF. "But Europe's experience should be a stark warning to the rest of the world on the danger of free allocations of pollution permits."

This article was featured on Edie.net


Permanent link for this article