Memorandum submitted by the City of London
The City of London Corporation, on behalf of
its international carbon finance practitioner constituency, strongly
supports the EU Commission's new proposals to strengthen and enhance
the EU Emissions Trading Scheme, as part of its Climate Change
Review. There are however a few specific reservations which the
City would wish to highlight at this time.
Clear targets to continue the Scheme and increase
emissions reduction targets beyond the close of its "Phase
II" in 2012, and beyond the first commitment period of the
Kyoto Protocol, will serve to raise levels of confidence generally
amongst the European financial and industrial community and assist
in longer term business planning and strategies. The inclusion
within the Scheme of additional industrial sectors and greenhouse
gases should enhance its ultimate effectiveness. Moving forward,
the City would support strongly the inclusion of Carbon Capture
& Storage initiatives within the EU ETS.
The Commission's plans to continue the dialogue
with Governments of developing countries should assist in ensuring
that capital flows for essential infrastructure projects are maintained
and encouraged, and that these countries are themselves incentivised
to participate in international initiatives to reduce greenhouse
gas emissions. The EU ETS is currently the world's largest and
most successful such scheme and efforts to link other new greenhouse
gas reduction schemes around the world with the EU ETS will ultimately
result in a more effective "discovery" of the true costs
of mitigation. Unlinked, individual national schemes would give
rise to different costs for abatement and mitigation and, therefore,
lead to a lack of clarity for international businesses planning
for the long term.
Any proposals to limit the use of UNFCCC-approved
credits from outside the EU ETS, or to discriminate against certain
types of credits within the Scheme (land use, land use change
and forestry (LULUCF) credits, for example), should be viewed
as a backward step as this could serve to discourage investment
in cleaner technologies and reduce market efficiency. This, clearly,
is at odds with the findings of the Stern Review. Recommendations
in the Review that a proportion of the proceeds from auctioning
of credits by Member States should be invested in clean technology
projects, and projects not recognised within the EU ETS (LULUCF),
need to be formalised.
A clear message from the Commission on the requirements
for the adoption of an increased 30% reduction target in European
GHG emissions by 2020, as opposed to the current 20% target, is
essential if European industries are to gauge the costs of abatement
most effectively, as the burden of a significantly increased reduction
target would fall directly upon installations falling under the
Scheme, via reduced allocations of permits.
5 February 2008
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