* Carmakers want emission policy rethink, citing high cost
* Move would follow California's cap-and-trade plans
* Greens fear including cars could undermine current
By Ben Garside and Barbara Lewis
LONDON/BRUSSELS, Aug 20 Environmental
campaigners are bracing to take on big business over whether
Europe should follow California's lead and include road
transport in the EU carbon market.
Bringing transport - Europe's biggest source of greenhouse
gas emissions after the power sector - into the EU Emissions
Trading System (ETS) could bring down the costs the car industry
faces in meeting existing regulation as well as tackling the
oversupply on the carbon market.
Environmental campaigners, however, say such a move would
undermine more-effective policies.
The arguments are likely to flare later this year when the
European Commission, the EU executive, is expected to make a
policy statement on a new 2025 standard for CO2 emissions from
cars and EU leaders set a 2030 goal for overall emission
The Commission has not suggested including a specific
EU-wide 2030 target for transport even though the sector is the
fastest-growing source of emissions.
So far emissions from Europe's transport sector, which
accounts for a fifth of all EU greenhouse gas discharges, have
been forced downwards by emission standards for new cars. These
have compelled carmakers to make engines more efficient,
although testing loopholes have raised doubts over their
The targets' ambition was also eroded by industry
lobbying. Earlier this year, EU lawmakers agreed average new car
emission limits for 2021 only after those caps were weakened by
lobbying from Germany, home to brands such as BMW.
Even the diluted goals are still the toughest in the world
and carmakers say any further cuts would be technically
difficult. They also say they face higher costs than other
sectors to meet existing goals, but so far have stopped short of
saying publicly they want transport to be in the ETS.
"Any new CO2-reduction policy should be cost-efficient,
technologically neutral and balanced in achieving the aim of
reducing CO2," Erik Jonnaert, secretary-general of the European
Automobile Manufacturers' Association, said by email.
The phrase "technologically neutral" is often used by
business to champion using the EU ETS to tackle emissions,
rather than sector-specific targets.
The idea is that the market sets a carbon price and then
allows included sectors to choose how they reduce emissions,
theoretically at lowest cost.
Environmental campaigners T&E oppose including road
transport in the ETS. They say it would do little to cut
emissions and make it easier for carmakers to persuade lawmakers
to scale back more-effective policies such as road taxes.
"The carmakers would scream 'double regulation' and argue to
weaken CO2 standards because emissions have been dealt with in
the ETS," T&E's Greg Archer said.
Europe has previously shied away from including transport in
the ETS, its flagship climate policy and the world's biggest
carbon market, partly because it would be tricky to measure.
Efforts to bring air and seaborne transport emissions into
the ETS have also been fraught. Lawmakers reversed plans to
regulate foreign flights after countries complained that doing
so would infringe on carriers' sovereignty.
But EU members Britain and Denmark have this year pushed the
idea of expanding the scheme and California has set an example
with plans to include transport in its cap-and-trade system from
next year alongside a raft of other regulations.
The EU ETS regulates around half of Europe's greenhouse gas
emissions by forcing more than 12,000 power plants, factories
and airlines to surrender an allowance for every tonne of CO2
emitted under a gradually decreasing emission cap.
The Commission admits the scheme is not driving down
emissions for now because of an allowance oversupply, which
accrued during the economic downturn.
That glut has pushed allowance prices down to
around 6.50 euros ($8.63) per tonne from more than 30 euros six
years ago, curbing incentives to invest in CO2-cutting
The EU executive has proposed to regulate supply by
establishing an allowance reserve but analysts say prices over
the next decade will remain too weak to encourage more
investment in low-carbon technologies.
California has sought to learn from the mistakes of the
Europeans by imposing a minimum price for auctioned allowances,
which currently trade just below $12.
Including transport would mean the EU ETS covered around 65
percent of the bloc's emissions and could mop up some of the
surplus by introducing more buyers.
But analysts expect the move to have a minimal price effect
because lawmakers would be forced initially to increase the
overall ETS emissions cap to accommodate the sector.
"The only way it would have much of an effect would be to
bring in transport without raising the current cap, but that
seems very unrealistic," said Richard Smokers of Dutch
consultancy TNO, tasked by the Commission to study options for
future CO2 targets for land transport.
He said even a carbon price of 50 euros would raise diesel
prices by 13 cents a litre, not nearly enough to drive emissions
down by encouraging drivers to cut journeys, drive more
efficiently or buy cleaner vehicles. ($1 = 0.7528 euros)
(Editing by Dale Hudson)