LONDON (Reuters) - The price to emit the greenhouse gas carbon dioxide faces a repeat of its price crash last year on the European Union’s carbon trading scheme, said a report by a London-based group opposed to closer EU political integration.
The report was attacked by some carbon market participants and lobbyists.
In 2006 the EU carbon price collapsed after it emerged that businesses had received too many permits to emit carbon dioxide, called EU allowances (EUAs), undermining the 27-nation bloc’s flagship climate change strategy.
A repeat scenario was possible in the second trading cycle of the scheme from 2008-12, said Open Europe on Thursday.
The group called for countries globally to be allowed to choose how they meet tough, national emissions targets.
“The attempt to create a global carbon market and a ‘global price for carbon’ through trading is unlikely to be successful,” the report said.
The EU carbon scheme involves big emitters like power plants.
From 2008 companies which bust their emissions targets can either buy extra EUAs or buy carbon credits through a separate carbon trading scheme under the Kyoto Protocol on global warming.
Kyoto carbon credits are generated from emissions-cutting projects in the developing world.
Thursday’s report raised the specter of an over-supply of these credits, prompting a repeat carbon price crash in Europe.
It cited World Bank and WWF analysis that the total shortfall of European allowances may be met solely by the import of carbon credits from developing countries, and speculated that a glut of such credits could prompt an EU carbon price crash, citing the University of Groningen’s Professor Catrinus Jepma.
The U.N.-backed Kyoto trading scheme was a great success, said CantorCO2e’s James Emanuel. The U.N. estimates that the scheme could produce over 400 million tonnes of annual emissions cuts between now and 2012, equal to the annual emissions of Spain.
“(Given) the vast volumes of greenhouse gas emissions that have been reduced as a direct result of emission trading, it is very difficult to empathize with the views of Open Europe... particularly when these critics are unable to propose a more viable solution to the problem,” Emanuel said.
Open Europe also criticized the carbon market for handing windfall profits to Europe’s biggest polluters, power generators, profits which many analysts agree could reach tens of billions of euros by 2012.
“Much of what is said in the Open Europe report represents a cherry-picking of the facts to support a politically motivated conclusion that the ETS, the central plank of the 27 EU Member States’ considered environmental policy, is a policy failure,” said Adam Nathan, a spokesman for London Climate Change Services, a lobby group.