EU Carbon Glut Means More Cuts Needed for 2030 Goal, Ecofys Says

A record surplus of carbon permits in the European Union’s emissions trading system will make it harder for the bloc to meet its 2030 climate goals, according to a report by Ecofys, the environmental research company.

The EU will need to cut carbon emissions by an extra seven percentage points because of the surplus of allowances, which can be held over into the next decade, according to the report commissioned by Greenpeace. The 27-nation bloc has a binding target of cutting greenhouse-gas output by 20 percent in 2020 from 1990 levels, and should reduce pollution by 40 percent in 2030, according to the EU’s regulatory arm.

“It is essential for the effectiveness of the EU’s emissions trading system that the trajectory of the EU’s greenhouse-gas target until 2030 is set in a way that takes into account any pre-2020 surplus,” Niklas Hoehne, director of energy and climate policy at Utrecht, Netherlands-based Ecofys, said in an e-mailed statement today.

The European cap-and-trade program imposes pollution limits on about 12,000 manufacturing companies and utilities in the region, including German utility EON SE and steelmaker ArcelorMittal. (MT) Europe’s economic slowdown reduced industrial production and cut demand for pollution rights, boosting the surplus of permits to about 2 billion metric tons last year, a level almost matching annual supply, according to the EU.

Stringent Target

“Given the currently expected surplus, the 2030 target or the trajectory towards it would need to be significantly more stringent than otherwise,” Hoehne said.

The permit glut pushed carbon prices in the EU emissions trading system, or ETS, to a record 2.46 euros ($3.25) a metric ton in April. The European Commission proposed delaying sales of some allowances, which member states and the European Parliament are currently considering. The stopgap measure would be followed by a deeper overhaul of the carbon market.

Greenpeace called on the commission, national governments and the Parliament to support cutting carbon emissions by at least 55 percent in 2030. That target should be a part of a EU new climate and energy package that includes a 45 percent objective for renewable energy and a binding energy savings goal, according to the lobby.

“This report shows the 40 percent 2030 carbon target put forward by the European Commission is woefully inadequate, especially given the impact of a failing ETS,” Greenpeace EU climate policy director Joris den Blanken said in the statement. “The EU needs a stricter 2030 target if it wants to keep the ETS alive and avoid the most severe effects of climate change.”

To contact the reporters on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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