As the global economic crisis has saddled the EU’ Emissions Trading Scheme (ETS) with a crushing oversupply of emissions credits and historically low prices, the European Parliament rejected the Commission’s proposal to offer a much needed bail out to its carbon market.
The ETS, originally established as “a cornerstone of the European Union's policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively”, has been in critical condition, due to a massive imbalance between supply and demand for carbon credits.
The so-called “backloading” proposal submitted by the European Commission to the European Parliament for approval in November 2012, supported the postponement of the auctioning of 900 million allowances of greenhouse gas emissions in 2013-2020. This was a vital measure for the restoration of the emissions trading market in balance, since the past two years have seen a rapid build-up of allowances, proving beyond doubt that the cap on emissions was consistently set at high levels, in order to serve a business-as-usual industrial activity.
As shown in a number of reports compiled by the NGO Sandbag regarding the implementation of the ETS in EU member states, the free overallocation by governments of emissions allowances to selected industrial giants has led them to accruing large surpluses in emissions credits. This has provided Europe’s major climate polluting industries with an important source of income, as they are allowed to either keep for future use or sell the free surplus credits. According to Sandbag and WWF Germany, industrial giants ArcelorMittal and ThyssenKrupp have made an important profit by selling surplus credits. It also serves as a major disincentive towards stepping up on innovation they will reduce their greenhouse gas emissions.
In a 16 April narrow vote of 334 against versus 315 in favour, the European Parliament rejected the Commission’s proposal for backloading of excess emissions allowances and, in practice, approved a business-as-usual scenario, which would continue to offer a “free ride” to the EU’s carbon-intensive industry.