Published: Mon, 10 August 2015
MEP for Ireland South, Seán Kelly, has welcomed new proposals from the European Commission for the reform of the Emissions Trading System (ETS) – the primary tool for the reduction of carbon emissions in the EU – noting that the reform of the system which had “failed thus far in its key objective of encouraging a switch to a low carbon economy” has been badly needed for some time.
The Kerry MEP spoke of how the ETS would be a vital part of Europe’s action on climate change, but warned that reforming the system while seeking to achieve food security and maintain industrial competitiveness would almost certainly lead to hugely contentious debates at EU and Member State level in the coming months and years.
Speaking this morning, Mr. Kelly said that “emissions trading and carbon pricing will play a significant role in helping us to meet our Greenhouse gas (GHG) emissions targets and ultimately halt the worrying trend of global warming. The economic downturn in 2008 resulted in decreased industrial production and thus led to a low and ineffective carbon price. Now, as we reach a critical juncture in climate change negotiations, it is extremely timely that this proposal for reform has been put on the table”.
An element of the reform proposal that is set to bring much discussion at EU level is carbon leakage – the term used to describe the situation that may occur when, as a result of the costs of climate policies, business activities are displaced to other countries with less strict rules on GHG emissions. Mr. Kelly welcomed a comprehensive discussion on the protection of key European sectors that are most exposed to carbon leakage:
“While emission reduction is our ultimate goal in this revision, it is important to maintain carbon leakage provisions to prevent any possible de-industrialisation of Europe. We must approach these discussions with caution and bear in mind the parallel challenge of food security in Europe. Our Dairy sector, specifically the production of Skimmed Milk Powder (SMP), for example, is particularly exposed to carbon leakage and at risk of being displaced. We must ensure that this production process, which is vital to our dairy farmers, is given due attention so that farmers are not at risk”.
Another important aspect of the revision is the way in which revenues are used. Companies covered by the ETS must buy emission allowances which can be traded with others on the market. The price of these allowances depends on the supply/demand ratio. Utilising the revenues generated, the proposed reform would create an innovation fund beginning in 2021 and worth up to €10bn for the development and deployment of low carbon technologies and installations. Mr. Kelly said that he is pleased at the inclusion of the fund in the proposal:
“We have seen before through initiatives such as the NER300 fund, the benefits of investing the money generated by the sale of allowances into the deployment of low carbon installations. I am extremely pleased that an innovation fund for low carbon technologies, carbon capture and storage (CCS) and Renewables is proposed. We have already set our goal to be the world leader in Renewable Energy technologies and this innovation fund will provide a strong push towards achieving this. As we approach the Paris Climate Change conference in December, it is important that the right signals are given to highlight our desire to shift towards a low carbon economy and this proposed fund certainly fits the bill in this regard”, concluded Mr. Kelly.
The European Commission’s proposal will be debated in the coming months by the European Parliament and the European Council, both of whom will amend the texts presented. Seán Kelly is currently leading discussions on Climate Change in the Parliament’s committee on Industry, Research and Energy (ITRE) ahead of the UN Climate Change Conference in December where a global agreement on tackling climate change is expected to be finalised.