Failure of the Emission Trading: Is Europe Losing its Pioneering Role in Climate Policy?

In April the European Parliament rejected the European Commission's proposal to temporarily suspend market trading in CO2 emission certificates in order to stop the price erosion of emission rights and to give industry incentives to invest in climate-friendly technologies. Is the reform of European emission trading now doomed to fail? In the opinion of Hans-Jürgen Nantke, Federal Office for the Environment, emissions trading is a highly effective instrument for protecting the environment. The degree of its effectiveness, moreover, depends on the political will to achieve ambitious goals for reducing carbon dioxide levels, which is currently lacking in the EU. In both trading periods to date companies subject to the ETS have been over-generously allocated emission permits that have largely been free, meaning that this price signal could not create any clear incentive to invest in additional climate protection measures. Alfred Endres and Frederik Schaff, Open University of Hagen, see narrowing the framework for emissions harmful to the climate that is created by issuing emissions certificates as meaningful from an environmental point of view. Backloading, however, would only displace the problem. The outlook would be better if the decision had been taken to remove emissions rights from the market irrevocably. However, the policy-makers responsible lack the will power to take this step, note the authors. Till Requate, University of Kiel, also believes that backloading only represents a short-lived, regulatory intervention, since it does not resolve the problem of the uncoordinated coexistence of European, national and regional energy policy. Only a long-term reduction in the number of emissions certificates would help to achieve the climate goal. It would make sense to link the EU ETS to other emission trading systems. Susanne Dröge, Stiftung Wissenschaft und Politik, Berlin, sees the EU reform as a trap and fears that European emission trading stands to lose its pioneering role.