Letter to Environmental Council: urgent ETS and FFS reforms

CAN Europe sent the following letter to Environment Ministers

Dear Minister,

Ahead of the Environment Council meeting on October 26th, I am writing to you on behalf of the Climate Action Network (CAN) Europe. With over 120 member organisations – representing over 44 million citizens – we are Europe’s largest coalition working on climate and energy issues.

We would like to highlight both the need for bold reforms of the Emissions Trading Scheme that go well beyond the Commission’s proposal and the urgent need to phase out fossil fuel subsidies.

Bold Emissions Trading Scheme revision

Despite being hailed as the flagship of European climate policy, the Emissions Trading Scheme (ETS) has failed to encourage investments in low-carbon technologies. Without far reaching reforms, companies can delay or cancel investments in cleaner and more efficient production.  Please find attached our priorities for the ETS reform which include:

1. Making the ETS fit for purpose by permanently cancelling surplus pollution permits, by increasing the ETS target every 5-years and raising the linear annual reduction factor to be in line with a cost effective reduction of 95% by 2050.

2. Stopping industry handouts and windfall profits by significantly limiting free allocation through a tiered and focused system. There is no evidence for carbon leakage and recent research shows that future risks are absolutely minimal.

3. Using revenues for climate action. All auctioning revenues should be earmarked for more ambitious climate action and the just transition, both in the EU and internationally, including through automatically setting aside a part of these for the Green Climate Fund as proposed by the European Parliament.

Urgent phase out of fossil fuel subsidies

In countries all over the world fossil fuel subsidies have proven to be a barrier to climate action.  Their phase out would reduce global greenhouse gas emissions by over 20%. The EU’s total fossil fuel subsidies for 2015 are estimated by the IMF to be over € 200 billion. Member States should lead the way in fully phasing out these subsidies. Our recommendations include:

1. The Council should take immediate action to develop and agree on a roadmap to phase out fossil fuel subsidies by 2020. The roadmap should address the large implementation gaps that prevent the phase out of fossil fuel subsidies.

2. ETS reforms should not contradict the phase out of fossil fuel subsidies: Handouts of free emission allowances to the power sector and to heavy industry are a form of subsidy and should therefore be phased out, with resulting revenues used to support climate action and the just transition domestically and internationally.

3. The Annual Growth Survey should take into account both the shift to a circular economy and the implementation of the Sustainable Development Goals. The National Reform Programmes submitted within the European Semester process could constitute a reporting mechanism for Member States on their progress to phasing out fossil fuel subsidies.

Best regards,