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              • The future of the EU ETS market

                July 17, 2014
                by Alessia Re

                Gas emissions - Source: sciencedaily.com

                A new report by the Committee of the Environment (CE Delft) says that the European Commission is using an “outdated” list to grant free carbon emissions allowances to industries which say they face the risk of relocation abroad – or ‘carbon leakage’ – due to the bloc’s climate policies.

                Carbon leakage has been an important argument in the design of the Third Phase of the EU ETS. By giving free allowances to industries prone to carbon leakage, the EU ETS tried to combine a restrictive climate policy with the goal of shielding energy-intensive industry from high carbon costs that would affect their competitiveness.

                The 2009 assessment assumed a carbon price of 30 euro (30,8 dollars) by 2020, although it is now unlikely to exceed 12 euro ( 15,5 dollars).

                Exposed sectors would exceed their benchmarked free allowances by 60%. According to the same evaluation the non-EU countries were not part of the EU ETS.

                This study shows that applying more realistic assumptions regarding price, supply and trade conditions would imply a drastic reduction in the number of sectors eligible for additional free allowances.

                A revised assessment indicates that if the 2009 allocation had been based on more realistic assumptions, the sectors deemed at risk of carbon leakage would have fallen from the current 60% of sectors, representing 95% of industrial emissions, to a mere 33% of sectors, accounting for only 10% of emissions.

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