The UK's EU climate policy car crash
- 25 Jan 2013, 14:45
- Mat Hope
It's been a gloomy week for UK climate change policy in Europe.
In the last seven days the carbon price twice crashed to record
lows, the UK prime minister called for a revision of key
environmental regulations, and the European Commission landed the
UK with a large fine over mishandled energy policy.
Carbon price hits record lows
The European Union's Emissions Trading Scheme (EU ETS) is reeling
after a large permit auction failed earlier in the week, and the
European Parliament then rejected a measure to bolster the scheme.
The scheme has been struggling after months of low prices.
Companies buy and sell permits to emit carbon dioxide under the EU
ETS. If companies emit less than their permits allow, they can sell
the excess for a profit. The scheme is meant to reward those that
cut their emissions, and it relies on a shortage of permits.
But on Monday prices crashed to below €5 per tonne of carbon
dioxide for the first time following a failed auction in Germany.
Almost four million permits went unsold as bidders failed to meet
the reserve price.
On Thursday the price briefly tumbled to €2.81 per tonne after a
European Parliament Advisory Committee opposed a measure to boost
the price. The committee representative for Poland said that he
voted against the measure as Poland was "opposed to climate policy
tightening in times of crisis".
Some market analysts saw the price drop as an overreaction to the
news - the price later recovered to just under €5 per tonne. But
the future of the EU ETS is pretty uncertain. It seems likely that
it will limp on as it is very complicated to dismantle. The EU's
climate commissioner Connie Hedegaard says that the price crash
should serve as a "final wake up call" to governments and the
European Parliament over the need to reform the struggling
Suspending EU laws
The carbon price crash comes in the same week that David Cameron
announced he wanted to re-visit some other European environmental
regulations. The prime minister said in Prime Minister's Questions
on Wednesday that environmental legislation was an area where
"Europe has gone too far". It's not really clear from this whether
he's talking about climate policy or not, though.
The ENDS report suggests that the Conservatives would like to get
rid of the EU's renewable energy target but keep an emissions
reduction target. The argument is that this would allow the UK to
cut emissions with other energy sources such as shale gas, which
the prime minister is known to support.
In the same week, the UK Independence Party (UKIP) took time out
from the referendum debate to launch a campaign to suspend the EU's
climate change package. The party claims that "we in the UK have a
target of 30% of electricity generation from wind by 2020" which is
"massively massively expensive".
Actually, the UK has a target to meet 15 per cent of the UK's
energy demand from renewables by 2020, as required by EU law. This
could mean that around 30 per cent of the UK's electricity would
need to come from renewable sources - but not exclusively from
EU biting back?
It seems the EU is also unimpressed with the UK. It emerged today
that the European Commission (EC) is sending the UK to the European
Court of Justice for failing to implement new EU energy
regulations. This could mean that the UK faces fines of almost
€150,000 a day until it complies.
The EC is complaining that the UK has failed to properly
incorporate itself into an integrated European energy market. The
problem is that while the market in England has been liberalised,
the regulations are yet to be applied in Northern Ireland.
So is the EU punishing the UK because of the prime minister's
promise of a referendum on Britain's membership, as the Daily
Express implies? It seems unlikely - the infringement proceedings
began more than a year ago and the UK isn't the only country to be
punished. Belgium and Estonia are facing fines for the same thing.
The UK can still get out of being fined though, if the government
gets a move on.
Must try harder
So overall, a bad week for climate change policy and the UK in
The wider sense of confusion over the UK's position in the world
appears to be coinciding with bad news on the carbon price. But the
situation might not be as gloomy as it first seems.
The carbon price has been falling for a long time and the UK still
has time to escape the EU fine. As for the prime minister's
statements on European environmental regulations? Detail is still
thin on the ground. And hey - at least it's the end of the