Last Wednesday saw the UK launch of Sandbag's annual review of the Emissions Trading Scheme. Held in the House of Lords, with keynote speech by UK Secretary of State for Energy and Climate Change secretary Chris Huhne, Sandbag wanted the event not only to highlight the findings of our report but to spark lively debate about what should be done.
The discussion was ably chaired by Damian Carrington, Head of Environment at the Guardian, who gave a brief introduction before Baroness Bryony Worthington summarised the finding of 'Buckle Up!': with such clear evidence that the ETS cap needed tightening, she challenged heavy industry to stop blocking reform that was in the best interest of the EU economy as whole.Chris Huhne spoke of the importance of getting off the 'oil hook', with Europe's ETS and other EU and UK policies helping to drive investment in more secure, renewable sources of energy at home – while this would cost more in the short term it would insulate us from the rising fossil fuel prices and price shocks in the longer term. In a short statement provided for the launch of report he said: “The EU’s emissions trading system is a cornerstone of Europe’s climate change policy but this report highlights that it needs to be strengthened if we’re to meet our longer-term climate goals. That’s why we’re pushing for an EU target of a 30% emissions cut and want the ETS cap tightened for its third phase, which will help restore the incentives for low-carbon investment.”
There followed a short question and answer session before the Secretary of State had to leave. Representatives of industry raised their concerns over increasing costs of energy, and Mr Huhne assured them that the intention was not to drive manufacturing out of Europe, but to help companies become the low-carbon world-leaders helping to build the wind turbines and other infrastructure that the green industrial revolution demanded for Europe.
Finally, Ian Rodgers of UK Steel gave an impassioned response to our report: while competitiveness had not been damaged so far, UK Steel was very concerned about the future impact of the ETS. There was a real danger, Mr Rodgers argued, that steel companies would run out of allowances by 2018 resulting in cost increases of up to 10%. The EU ETS was 'no longer fit for purpose – at least, not for internationally traded sectors' and alternatives should be considered. They were prepared to 'call Sandbag's bluff' on our suggestion that if the Steel industry continued to remain such a block it should be removed from the ETS and regulated through alternative policy.
From Sandbag's perspective it was significant to hear UK Steel confirm both the huge surplus the sector has received, that competitiveness has not yet been affected by the ETS and that they expect to have sufficient permits to cushion them until 2018. Mr Rodgers argument appeared to be based upon fears of what the impacts would be in the future, not past or current effects. Bryony pointed out the unreliability of the industry's past projections, and challenged Mr Rodgers to explain why production graphs had had shown declining output up until 2005 but were presented with a sudden projected reversal when companies were asked to submit their requirements for carbon allowances. This was explained by the rising demand from China, was the reply: but the why didn't this demand show up in protected sales during the recession?
The discussion was energetic, and despite obvious differences there is a good deal of common ground to explore between the fears of the steel industry and the importance of getting the ETS to work. Sandbag has always maintained that it was a mistake to include competitively exposed sectors in the ETS from the outset – a power only scheme would have been far more likely to demonstrate early, effective results.
What is crucial is that we do not let a few industrial sectors prevent the flagship EU policy on climate from doing its job, and setting Europe on the road to the the 'clean industrial revolution' that will make it a world leader in the 21st century.
This Thursday Sandbag hosts a EU launch event for Buckle Up! at the European Parliament, with keynote address by climate commissioner Connie Hedegaard.
You can read press clippings from the report launch here