Speech by Rt Hon Hilary Benn MP at the EU Emissions Trading Scheme discussion event, London - 25 October 2007
Opening
Thanks to Malcolm. And thanks to all of you for coming today. Your support and contributions to the work we’re doing are invaluable.
Reflection and Achievements
Looking back, over the past five years, there are some achievements we can really be proud of:
- We were the first country to attempt carbon trading with our voluntary scheme in 2002.
- We pushed for agreement on an EU emissions trading scheme; and, with some hiccups, a functioning European scheme was in place by 2005;
- The decisions that the UK took on phase II of the scheme were arguably vital in setting a level of ambition which the Commission then applied to other Member States.
We have come a long way in a short space of time. Now the EU Emissions Trading scheme is the first of its kind in the world. The carbon market continues to grow. There was €15.8billion worth of carbon allowances traded in the first half of this year.
We knew when we started EU ETS that it would involve a lot of learning. Nothing of this scale or design had ever been tried before. The over allocation of allowances in Phase I showed just how much we had to learn. But we will learn more in Phase II; and we need to think now about how we want the scheme to operate beyond 2012.
Planning for this now will help us contribute effectively and convincingly towards the Commission’s draft directive in January. Martin Nesbit touched upon some of our aims for the review in his presentation this morning. They have been subject to much discussion during the day, and I look forward to seeing the detailed report of your discussions. I’d like to set out now some of my thoughts about the review for you now.
Goals for the Review
(i) A Functioning MarketThe review focuses on what worked and what didn’t during the first phase of the scheme. There are essential things we need to get right for the scheme to operate effectively. Things which will create a liquid and dynamic market for carbon allowances, and which create the right rewards for real carbon reductions. So there are some changes which we must get from the UK’s perspective in the Review. It will not surprise you that two key priorities are:
- a rethink on cap setting.
- an increase in the use of auctioning to distribute allowances.
(ii)Cap-setting
The review must address the low carbon price. That means creating a more predictable, top-down approach to cap-setting, which avoids over-allocation.
Cap-setting must be fair across the EU and the UK. We think that an EU-wide central cap is the right way to set an ambitious target in the EU ETS, and to ensure that all EU Member States contribute to deeper emission reductions. And, as Malcolm mentioned earlier, it is important for the EU collectively to give clearer long-term signals about future caps, so that investors have more certainty about what they will be expected to deliver.
(iii) Auctioning
The UK has already announced through the Pre Budget Report that we expect to increase the level of Auctioning in the scheme in general with a significant increase in the power sector.
(iv) Expansion
We also hope to expand the scope of the scheme to include some emitters currently not covered. The principle should be that sizable industrial emissions should be included in EU ETS, for example in the chemical sector.
The EU ETS Wider Perspective
This is a crucial moment for the politics of Climate Change. We need to get the ETS working at its very best, to demonstrate a dynamic and effective carbon market within the EU and to secure its contribution to national and global carbon reduction targets.The EU ETS does not exist in isolation. It is part of a range of policies. This gives us flexibility, and provides us with a wide range of methods to achieve Carbon emissions reductions. This is why we are ensuring the EU ETS fits in with our other UK and EU targets for Green House Gases and Renewable energy.
EU ETS Linking
But it is also important for the scheme to be able to join with other strong and credible carbon trading schemes around the world. The changes made in the review of the EU scheme must be mindful of the aim to link with others around the world to create a global carbon market which is our long term goal.
Many other countries around the world, as well as some Australian and US states, are now planning their own emissions trading frameworks. They will look to the EU’s example. They will look to learn from our mistakes - but also look for leadership on emissions trading. Many of them already have an active interest in linking to the scheme and in trading carbon allowances globally.
The Review therefore needs to consider how we can ensure that links are forged with schemes with similar levels of ambition and integrity. We need to create a truly global market for carbon, in line with Nick Stern’s recommendations, to ensure that as the world’s willingness to take action becomes clearer, we have an effective way of tackling the problem of greenhouse gas emissions at least cost.
EU ETS World Leader
So, countries outside the EU as well are looking to the UK for views on how to develop trading schemes. They are also keeping a close eye in the how the EU scheme is working. It is through your support of the scheme, your contribution and expertise that Britain can become a pioneer in Carbon abatement technology, and a successful trader of carbon allowances. This helps to ensure that the EU ETS stands out as a good example to others wishing to join the carbon market.
One of the things about the UK that most strikes observers from other countries is the degree of agreements among a wide range of stakeholders – from NGOs to business groups. I don’t pretend that you would all come to the same decisions. But when there are shared messages we can put forward – as we did with the UK stakeholder manifesto on the future of emissions trading earlier this year – they can be particularly effective.
We know that we want a scheme that is environmentally effective, and helps deliver our objectives on avoiding dangerous climate change. We also know that we need to demonstrate that we are tackling the problem cost-effectively; that the UK’s example is one of how a carbon-constrained economy can be a competitive and thriving economy; and that we are dealing with the particular issues of industries that are exposed to the pressure of international competition.
Because the purpose of the UK’s efforts on climate change is not to be an isolated beacon of virtue; it is to be part of change internationally. This is not a problem that we can solve on our own; but equally, it is not a problem that can be solved without us making a convincing and effective first move. Internationally we want the December 2007 Bali Climate Change Conference to agree to launch the negotiations for a global and comprehensive agreement on climate change.
The Big Picture
Finally, I would like to echo Malcolm’s thoughts and thank you all for your hard work and involvement today, I am told that there were many lively discussions and there has been a full and frank exchange of views. This is good; it’s the aim of consultations to collect as much information as we can in order to make the best decisions for the future.
It is easy to get caught up in the fine details throughout these discussions. It is important never to forget the importance of the main goals here and how it’s vital we keep our eye on the bigger picture.
We need to halt dangerous Climate Change, for the good of the UK, for the good of the world. Not doing so costs us economically, socially and morally.
We all have our part to play.
Thank you
Page published:
9 November 2007