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EU ETS Stakeholder Event

Malcolm Wicks MP,  Minister of State for Energy
London,  25 October 2007

This event is intended to advance the debate on emissions trading, and I hope you’ve found it useful so far. It’s right that Government, industry and NGOs should come together in this way to discuss the issues and exchange views, and my hope is that, in the course of today, we can make some progress towards a united vision for the future of the EU Emissions Trading Scheme.

It’s important to remember that the EU ETS is the first multi-national carbon trading scheme ever. It’s vital therefore that we learn practical lessons from the experience. Inevitably, as we come to the end of the pilot phase, some elements need to be changed.

The current review of the Directive is our chance to make those practical changes, but it’s also a real opportunity for the UK to set out its vision for a truly effective EU Emissions Trading Scheme in the longer term – one which helps us tackle climate change, which enables us to continue to have secure and increasingly low-carbon energy supplies, which allows us to continue on a path of sustainable economic growth – and which ultimately can link with other schemes as they develop elsewhere in the world, moving us towards our vision of a genuine global carbon market.

We’re very clear about our objectives for the review. We want to achieve the emissions reductions set at the Spring European Council – either a 30% reduction in greenhouse gas emissions from 1990 levels tied to international agreement for the post-2012 period, or a unilateral 20% reduction. We want a long-term emissions target to be agreed, ideally matching the 60% reduction by 2050 that we’ve already set ourselves here in the UK. And, crucially, we want a well-functioning carbon market, with a robust carbon price.

I know that what industry needs above all is clear information and certainty about the medium and long-term framework that Government sets. Only then will companies be able to invest with confidence – and we need that investment if we’re to achieve our ambition of moving quickly towards a low-carbon economy. After all, power stations are long-lived assets, and we’re all now engaged in planning for 2020 and beyond.

So, in the Climate Change Bill, we committed to setting our targets 15 years ahead – and we are now pushing hard for the revised Directive to apply the same 15-year timeframe to EU ETS targets too.

Incidentally, as you may know, on Tuesday I launched the Energy Markets Outlook, a new service providing detailed energy market information and analysis, once again looking 15 years ahead.

There are many other issues with EU ETS. We believe emissions caps must be set in a better way, with the overall cap set at an EU level in line with the 2020 targets. There will clearly be more auctioning of allowances, and this does raise some valid concerns about competition. Our views on these questions are still developing, and I know many of you have already contributed to the economic analysis that will feed into our decisions.

We won’t always agree about the analysis, but Government’s job is always to take decisions based on the best information available. Economic analysis is a vital part of that, but it can never be the whole story. In taking these policy decisions we consider all the evidence, including what individual stakeholders such as yourselves are telling us. This dialogue is necessary for good policy-making, and it will continue.

I mentioned earlier the need for the EU-ETS to be able to link to other schemes as they emerge elsewhere in the world. Climate change does require a global approach, not only because it is a global threat, but also because industries operate globally. For the EU ETS, this means making sure that the scheme is structured in such a way that it can link to other schemes; but it also means that we have a responsibility to demonstrate to the rest of the world that emissions trading can work, to show that this flexible, market-based approach is an efficient and cost-effective way of reducing emissions. A global carbon market may seem a long way off, but if we can make the EU ETS a really successful scheme, then I believe other regions of the world will see that it’s in their interest to follow suit.

The debate on climate change and emissions trading is as advanced in the UK as it is anywhere in the world. We know what a massive challenge climate change is. We have agreed we will tackle it head-on. And, in publishing the UK Manifesto on EU ETS in March this year, we agreed that emissions trading is a key part of the solution. The quality of this debate, and the progress this country has already made on emissions trading, is a tribute to you and your organisations. Thank you again for your contributions today.