There is a serious tension between two different strands of EU climate and energy policy. As reported by EurActiv on Thursday, 16th June, there is significant discord between the drive for energy efficiency and savings, in particular the upcoming energy efficiency directive, and the European Emission’s Trading Scheme (ETS).
What's the point again? Oh yes, cutting our greenhouse gas emissions! Image cc. Paul Glazzard
The tension arises because the ETS, which already suffers from an overabundance of permits to pollute in the market (partly due to the recession which led to drops in emissions, which were not anticipated when permits were allocated in the last phase), is afraid that implementing energy efficiency and savings policy (becoming more efficient in our use of energy means wasting less and using less energy) will undermine the carbon price. The idea is that efficiency measures cancel out the need for as many pollution permits, leading to an even bigger market glut, an even lower price for carbon, and ultimately less revenue designed to be re-invested in low-carbon technologies.
The result of this is that DG Climate Action are apparently concerned about, and have spoken out against, the upcoming energy efficiency directive of DG Energy. This is very worrying, because in and amongst their turf wars and political posturing, I’m afraid that the Commission is forgetting the point. QCEA would like to remind DGs Climate Action, Energy, Environment, Enterprise and Industry, Transport etc., that the purpose of policies like the ETS and energy efficiency directive are to cut emissions.
The possibility that something that would so obviously reduce emissions (using and wasting LESS energy) could be under threat because of a carbon trading system that has failed to produce any measurable emissions reductions and served up windfall profits of billions of euros to polluting industries, beggars belief! The goal is to reduce the amount of greenhouse gasses Europe emits. Energy savings will do this, no question. A struggling carbon market with an overabundance of permits will not.
If the EU insists on keeping the ETS as an instrument, then for goodness sake, do not let it be the reason for trampling the desperately needed energy savings agenda, just to keep the carbon price high. If you want a high carbon price, pull out the excess permits! By all means, pull them out in a predictable and stable way so as to keep the market functioning, but if you want emissions reductions then you need to do it and do it on a big scale. This is something Commissioner Hedegaard previously suggested – setting aside a corresponding number of carbon permits from auction in the third phase of the ETS between 2013-20, in order to compensate for any carbon price shortfall. Compared to jeopardising the energy efficiency and savings goals, this makes sense, and QCEA would like to speak out as a counter-balance to some of Commissioner Hedegaarde’s colleagues and industry representatives who are very comfortable with low carbon prices (i.e. an excess of permits in the market).
According to EurActiv the final text of the efficiency directive is still being intensely negotiated behind closed doors by the commissioners’ staff in Brussels, despite being expected to be launched on 22 June 2011. QCEA implores the Commission not to sacrifice the certain emissions reductions from energy savings for the (at best) uncertain reductions from the ETS. Doing so would be no more than preserving “a system that is in place now – the ETS – which is a global leader” as Peter Vis, the chief of staff of EU Climate Commissioner Connie Hedegaard, called it. But it is not about being a global leader in emissions trading, it is about cutting emissions, which is what energy savings will do.
The QCEA Blog 
The Guardian newspaper reports today that “Europe’s top industrial firms have a cache of 240m pollution permits –
European Commission estimates energy-intensive sector will have accumulated allowances worth €7-12bn by the end of 2012”.
The bad news: “a small group of carbon fat-cat companies are trying to stop this [the realisation of a highly efficient European economy with low pollution], in spite of making billions from a windfall of free pollution permits.”
The good news: Five major energy groups, including Britain’s Scottish and Southern Energy, last week called for spare permits to be withdrawn.
“Failure to do so could severely hamper business incentives to invest in low-carbon technologies, as the price signal will be skewed in favour of fossil-based solutions,” their statement said.
The message: If you want a functioning ETS, withdraw the excess permits, don’t jeopardise the energy efficiency and savings drive!