The European environment committee has voted against a proposal which would bring an end to the payment of substantial carbon dioxide emission allowances on behalf of industries.
The European Union faces a conundrum when it comes to reducing its carbon dioxide emissions. On the one hand, charging companies for their emissions can encourage a reduction, but on the other hand it can cause them to relocate their operations to areas with lower environmental standards.
Relocation results in emissions being reduced in one area but increasing in another, with no overall reduction. This is also known as “carbon leakage” and renders attempts to cut emissions futile.
To get around the problem, the European Commission gives allowances away to some industries for free in the hope that it will prevent them from moving. The Commission has now prepared a list of sectors at risk of relocating on the assumption of a €30 price per allowance.
But Dutch politician and European Parliament member Bas Eikhout made a proposal to block the practice, suggesting that the allowances being paid by the Commission are much higher than the current average market price of €5. He believes that many of the sectors listed could therefore afford to pay the allowances without putting jobs at risk in the EU.
“The Commission’s methodology to identify sectors eligible for the allocation of free allowances is based on a carbon price of €30 per allowance. This price is far too high and puts sectors on the list that do not belong there,” he said.
He also believes that some sectors are being given the allowances when they are not even at risk. “Sectors that are not at all exposed to the risk of carbon leakage are now receiving free allowances,” he said.
His proposal yesterday was not accepted, however, which means the European Commission will continue to pay allowances for industries it thinks are likely to move elsewhere otherwise.