Letter to MEPs ahead of ETS reform vote on February 15th 2017

Climate action

Dear Sir or Madam,

I’m writing to you on behalf of Climate Action Network (CAN) Europe ahead of the plenary vote on the Emission Trading Scheme reform on February 15th 2017.

As signatories to the Paris Climate Agreement, the EU must turn the Emission Trading Scheme from a paper tiger into a strong climate protection instrument. In the Paris Agreement all countries agreed to hold the temperature increase well below 2°C and furthermore to pursue efforts to limit it to 1.5°C.

The Emission Trading Scheme is not meeting its main aim to efficiently cut Europe’s climate emissions, nor does it help to steer investments towards cleaner production and consumption. In 2016, the price of pollution permits again fell to less than 4 Euro. As a result, the EU ETS fails to promote low-carbon innovation and is not in line with Europe’s promises made in Paris. Significant reforms are therefore necessary:

We support the ENVI report as a step in the right direction, even though it does not go far enough to ensure that the EU delivers emission reductions in line with the Paris Agreement. Ahead of the upcoming plenary vote we therefore call on you to:

  • Vote for the ENVI report including the raise of the Linear Reduction Factor to 2.4% (AM40), the introduction of an import inclusion scheme for sectors with low trade intensity, for instance production of cement (AM84), aligning the requirements for aviation with other sectors and requiring that international shipping contribute to EU emission reduction targets; and
  • Vote in favor of adjusting the starting level in 2021 to actual emissions. Without adjusting the starting level to actual emissions, the EU ETS remains completely out of step with reality and would immediately create a huge surplus of pollution permits, thereby further depressing the carbon price.

Instead of cutting emissions, some companies have made huge profits from the millions of pollution permits they have received for free. From 2008-2015, industrial sectors have received over 1.5 billion more pollution permits than they would have needed to cover their actual emissions.   

Member States and their businesses must be able to invest in renewable and energy efficient technologies through incentives established by the Emission Trading Scheme and other instruments.  Auctioning revenues are essential to finance this low-carbon transition. EU countries have so far received nearly €12bn revenues from such auctioning. This vital revenue could multiply with a higher carbon price and an increased share of auctioned allowances. 

Empirical evidence proves that the Emission Trading Scheme has not had a negative impact on the international competitiveness of European industries – even though some sectors continue to claim otherwise. In order to make the system fairer as well as meaningful, the carbon leakage list needs to become significantly more targeted and ultimately all free pollution permits should be phased out. 

The ongoing reform is the last opportunity to make the Emission Trading Scheme relevant. Policymakers prioritizing short-term economic interests have blocked and watered down meaningful reforms for over ten years. Delaying climate action for another ten years or longer would close chances for staying below 2oC of warming.

The Members of the European Parliament now have the opportunity to endorse these important improvements to the Commission proposal, helping Europe move towards a more socially just, low-carbon society and a more sustainable economy. We are counting on your support.

Thank you for your consideration. Please do not hesitate to contact us if you have questions or comments.