Report criticises the UK over its refusal to earmark EU ETS carbon revenues for financing green projects
auction of EU Allowances since its first auction in Phase II of the EU Emissions
Trading Scheme (EU ETS) in November 2008.
III and the UK could make a further 64 billion euros by 2020, with aviation joining the scheme in 2012 and additional greenhouse gases and manufacturing
processes being covered from 2013.
should be used to help reduce greenhouse gases, develop renewable energies and
clean technologies, and shift to low-emission forms of transport, the UK has refused to hypothecate revenues. An attempt by the European Parliament to force EU member states to comply when
passing the Aviation EU ETS directive was rejected by EU Council ministers.
certainly a positive step towards reducing emissions, say the report’s authors,
but they question whether the UK government will be as fully committed to mitigating
climate change when it comes to spending the money. In Carbon Retirement’s view,
earmarked revenue would provide stable financing for green projects, and ought
to be used to address fuel poverty, provide green funds for developing countries
and help meet climate change targets.
only to Germany, which has generated over €2 billion to date from auctions. Germany
has a much higher level of emissions, and as a consequence is allowed under EU
rules to auction over twice as many allowances as the UK per year. Other countries
using auctions include the Netherlands, Austria, Ireland and Hungary.
this year. Revenues will rise considerably from the start of Phase III of the
scheme in 2013, and the European Commission estimates that governments across
Europe as a whole will make around €15 billion a year.
tonne in 2020, the UK would earn €32-64 billion over the eight years of Phase
commitment from EU member states to spend at least half of the revenues from auctioning
to tackle climate change both in the EU and in developing countries. Its position,
however, is that earmarking is inefficient and also inappropriate for the EU to
determine member state spending.
currently earmarks €400 million of auction revenues annually, with €280 million
set aside for national projects and €120 million for international projects. The
report says other EU countries also earmark environmental taxes for various related
price growth outstrips people on lower incomes, Carbon Retirement says that the
most vulnerable members of society are being tipped into fuel poverty, and the
trend is likely to continue. “Earmarking revenues from EU Allowance auctions for
subsidised community energy generation or energy efficiency in social housing
would be a very sensible way of balancing out the potential adverse effect of
the EU ETS on this group.”
countries through the Green Climate Fund – recently agreed at the Cancun climate
summit – which is seeking to raise $100 billion a year. The report suggests that
earmarking auction revenues by the UK government – yet to specify where its proportion
of the funding will come from – would set an example that the rest of the EU may
noting that the UK ranks third from bottom in Europe for renewable energy generation,
ahead of only Luxembourg and Malta.
reduce emissions, providing an alternative to traditional project-based offsetting.
Clients include private equity firm 3i, the Church of England and the UK Committee
on Climate Change.