- Sciences-Po Paris
Le système ETS, clé de la réussite européenne
- Sciences-Po Paris
dimanche 23 février 2014
Mettre un plafond aux émissions de gaz à effet de serre, et établir un marché des quotas d'émissions : le "Emissions Trading Ssystem" (ETS), sur le principe du "cap and trade", doit être la clé de voûte de l'action européenne. (Article en anglais)
Right now the EU's energy mix is a risky chimera, an aggregation of 28 very diverse national energy mixes with France and Germany's opposing positions on nuclear power being emblematic to the situation. However, decarbonisation is the perfect opportunity for Europeans to unite in their diversity and build a real, carbon-free European energy mix.
For this effort to be successful, it is necessary to scrap the present-day chaos of different and often conflicting policy instruments and targets - for renewable energy, for energy efficiency, for reduction of emissions. Only then can a single and clear energy policy be built and have genuine results. Then again, these results will not come for free. Decarbonizing our economy will be costly. The question is ? how much? The answer will be decided on the EU level. This is why You need to wake up as a true, informed European Citizen and make sure that the right people will be making this decision in the EU Parliament.
Between utopia and reality
History has thought us that when a utopia is forced to become reality, the result is as grotesque and dangerous as the mythological three-bodied chimera. Such is, for now, the case of the EU?s transition to a carbon-free energy mix. The three key elements of the EU's "20-20-20" policy, namely emissions' reduction, energy efficiency and renewable energy, have not been working well together. "Not a single country is on track to meet all three targets at the same time but none is lagging behind on all three targets at once either", states the European Environmental Agency. The Emissions Trading Scheme (ETS) collapsed along with carbon prices to about 5 euros per metric tonne and paradoxically, Germany, the leader in renewables, is seeing its highest coal use since 1990. This fiasco, along with the rise of energy prices, has given nationalist movements a strong argument against the EU and greater public support, which will have its implications on the approaching European elections.
Overdoing creates inefficiencies
This chaos is the result of overdoing, i.e. the multitude of instruments used. On the one hand, the ETS, a market-based instrument, is a platform for emissions' reduction. On the other hand, administrative instruments are used to promote the spread of renewables, e.g. feed-in tariff and quotas. They undermine the ETS and make the policy inefficient. For instance, when the government gives money to subsidise renewables and they reduce overall emissions then there are more permits to emit on the market and their price goes down. Hence, the government indirectly pays for other emitters to keep emitting by paying for emissions' reduction for them. This, in combination with the decline of industrial activity after the economic crisis, explains the deterioration of carbon prices. The German paradox of a boom of renewables and an increase of emissions in 2012 illustrates this inefficiency of the current energy policy.
The question remains " how to mend the situation"
Save the economy or save the climate?
An impossible tri-lemma has divided Europeans: save the Planet, save the Economy or try to save both? Of course, saving both would solve the problem, but is it possible and what are the risks of saving none?
The one instrument which has the potential to save both is the ETS or also called "cap and trade". The following scheme shows the mechanism of allocating abatement efforts between companies through trade to arrive at the reduction target ? the cap (1).
Large energy users have the freedom to choose their optimal solution for abatement - energy efficiency, renewable energy or buy allowances from other companies (which can reduce their emissions more and relatively cheaply and sell this as an additional product).
However, the ETS at its current state cannot (re)build the EU's energy mix. Two things need to be done to make it effective. First, the surplus of allowances (one quarter, i.e. 2 billion) needs to be taken out of the market and second, the system has to become more dynamic so that the cap can adjust to slowdowns and accelerations of the economy and keep the carbon price in a reasonable range. In addition, a lot of resources must be allocated for research and development for clean technologies. Only then will the EU's energy mix emerge from the diversity of the 28.
Fighting the chimera together
The lesson we hopefully learned from the "20-20-20" strategy is about the nature of Europe's unity - respect and value for diversity. The ETS provides the necessary freedom to member states and their industries to find the optimal way to reduce their emissions, while it is a common instrument with a common goal for all. Each member state has its own energy mix that did not come about overnight and cannot be changed in such a manner - not without severe economic and political consequences. But we must also remember that energy played a key role for the birth of today's United Europe. Two of the three original pillars of the EU were energy related - the Coal and steel community and EURATOM, dealing respectively with protectionism in the coal industry and with nuclear energy. Today we need to unite in the fight for the future of our energy mix, because to agree on a new ETS system and an ambitious target for emissions requires strong political will with substantial public support behind it.
Energy is everyone's concern; not just because it has a strong effect on our climate, but also because it is the blood of our economy. We desperately need to make sure the blood, running in our economy's veins, is healthy, if we want it to survive. You are all part of the system and you pay for it. So make sure your money is spent wisely.
(1). Image source: http://www.shell.com/global/products-services/solutions-for-businesses/shipping-trading/environmental-trading-solutions/markets/basics-environmental-products.html
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* FIGURE: CAP AND TRADE SYSTEM
Source: Shell Global, Market Basics: Cap and trade, http://www.shell.com/global/products-services/solutions-for-businesses/shipping-trading/environmental-trading-solutions/markets/basics-environmental-products.html