Putting transport in the ETS will hinder job growth, stall emissions cuts – study

Even if carbon prices in Europe’s emissions trading system (ETS) trebled from today’s levels [1], including road transport in the ETS would only reduce oil use and CO2 emissions from transport by 3% over the next 15 years, a new study by Cambridge Econometrics reveals. This level is insufficient for road transport to make a proportionate contribution to Europe’s climate and energy security goals.

The idea of transport in the ETS has appeared in the latest leaked draft of EU Council conclusions, which EU government officials will discuss at today’s Sherpa meeting within the overall negotiations around the 2030 climate and energy package.

In comparison with setting ambitious fuel efficiency standards after 2020, inclusion of road transport in the ETS would lead to 160,000 fewer jobs and higher oil imports to the tune of €22 billion in 2030 growing to €77 billion by 2050.

Europe is committed to reducing CO2 emissions by 80-95% by 2050 to keep global warming below 2°C. Transport emits almost a third of the EU’s total CO2 emissions and will become the largest source of climate-changing emissions soon after 2020.

William Todts of T&E said: “Putting transport in the ETS is neither good for transport, nor for the ETS itself. It simply won’t reduce transport emissions in any meaningful way but it will make it more difficult to adopt policies that do work, like vehicle efficiency or clean fuel standards. It looks like proponents of transport in the ETS want to sweep the problem under the carpet, rather than actually doing something about it."

Denmark initiated this proposal with the objective of making emission reductions outside the ETS (non-ETS emissions) like in the transport sector easier to achieve, and has been lobbying other EU countries for more flexibilities ever since. Daimler and BMW have also pushed for this solution as a means of offloading the emissions-cutting obligations onto other sectors and weakening or even avoiding fuel efficiency standards for vehicles.

The easiest way to make transport part of the ETS is by issuing allowances for the sale of fuels. Fuel suppliers would be required to surrender permits, passing the cost onto drivers in the form of a carbon tax on road transport fuels. At the current price of €6/tCO2, the cost of fuel would rise around €0.015 per litre – which is about 1% of today’s fuel price.

While the leaked draft Council conclusions state that EU countries already have the right to include their transport emissions in the ETS, new legal analysis shows this is not allowed under the current rules. It violates the principle that the regulated entity, fuel suppliers, must be directly responsible for those emissions, whereas it is in fact the driver of the vehicle. The only option available to an oil company to cut emissions is to blend more biofuels, which have questionable environmental credentials.

“Besides damaging EU growth, employment and climate policy, putting transport in the ETS may not even be legal. It’s time for Denmark to drop this nonsensical idea and put the focus back on solutions that really cut oil imports and CO2 emissions,” William Todts concluded. 

  1. A carbon price of €20 a tonne, which is currently trading at just €6/tCO2. 

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Nico Muzi
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