Describes how the EU Emissions Trading System may, with advantage, be reformed so that coal, oil and gas are controlled where they come out of the ground or are imported.

1. UPSTREAM REFORM OF
THE EU EMISSIONS
TRADING SYSTEM
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2. CUTTING EMISSIONS IS
URGENT
The Royal Society recently published an
analysis which suggests that:
■ There is now little or no chance of keeping
global temperatures below 2°C.
■ 2°C now represents the boundary between
'dangerous' and 'extremely dangerous'
climate change!
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3. THE EU EMISSIONS TRADING
SYSTEM IS NOT WORKING
■ Less than 50% of fossil carbon
is covered.
■ Complex and vulnerable to WE NEED
fraud. A BETTER
■ Problems of unfair competition SYSTEM –
AND SOON!
and ‘leakage’.
■ ‘Import emissions’ not counted.
■ Too many allowances, too many
free, price of carbon too low,
and emissions not falling.
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4. DIAGNOSIS AND TREATMENT
■ A fundamental weakness in the EU ETS is that
it is a ‘downstream’ system (next slide).
■ Upstream reform:
■ would be relatively simple to do.
■ would solve most of the problems.
■ There is little chance of creating a robust,
effective system without upstream reform.
■ Given the urgent need for cuts in emissions,
upstream reform should be introduced
soon.
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5. UPSTREAM CONTROLS ON
FOSSIL CARBON
It is simpler, cheaper and
more effective to control
fossil carbon ‘upstream’
— at the relative handful
of places where coal, oil
and gas come out of the
ground — than trying to
control emissions
‘downstream’ at the much
larger number of
emissions-producing
businesses.
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6. UPSTREAM REFORM OF THE
EU ETS
■ Permits required to extract coal, oil or gas from the
ground within the EU.
■ Permits required to import coal, oil or gas into the
EU.
■ Permits would be auctioned, not give away for
nothing, and may be traded.
■ Numbers of permits reduced from year to year in
the light of climate science.
■ Money from the sale of permits may be used to help
businesses and people make the transition to the
clean, green economies of the future.
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7. BORDER LEVELLING
■ Border levelling is needed (with or without upstream
reform):
■ To protect EU businesses from unfair competition.
■ To prevent ‘leakage’ of industries out of the EU.
■ Imports and exports:
■ Permits would be required to import cameras, apples, coal, etc,
to reflect the fossil carbon that is embodied in them.
■ Credits for exports at the same rates as the corresponding
categories of imports.
■ Solves the problem of ‘import emissions’.
■ Is a potential source of funds for the EU.
■ Permits for imports takes us more than half way to an
upstream system!
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8. BENEFITS OF UPSTREAM REFORM OF
EU ETS (SUMMARY)
■ Control of 100% of fossil carbon.
■ Protecting EU businesses from unfair
competition.
■ Budget discipline, raising the price of
emissions to their proper level.
■ No need for legally-binding national
targets.
■ Simplicity:
■ Reduce administration costs.
■ Reduce fraud.
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9. TOWARDS A GLOBAL SYSTEM
■ Several additional benefits of upstream
controls in a global system.
■ An upstream EU ETS can serve as a
demonstrator and provide incentives for a
global system of upstream controls.
■ There would be a snowball effect because
the incentive would become progressively
stronger with increasing numbers of
‘upstream’ countries.
■ LET’S START THE SNOWBALL ROLLING!
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10. BENEFITS OF UPSTREAM
REFORM OF THE EU ETS (1)
■ In one step, the reform would achieve
control over 100% of fossil carbon used
in the EU, instead of less than 50%
with the system as it is now.
■ Simpler and cheaper to administer.
■ Allows tight controls in accordance with
climate science.
■ Reduced opportunities for fraud.
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11. BENEFITS OF UPSTREAM
REFORM OF THE EU ETS (2)
■ A reformed system is likely to raise the
price of carbon much closer to its proper
level.
■ No need within the EU ETS for the Kyoto
‘Clean Development Mechanism’ or ‘Joint
Implementation’ — thus simplifying
administration and avoiding problems
such as ‘additionality’, perverse incentives,
spurious accounting, and fraud.
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12. BENEFITS OF UPSTREAM
REFORM OF THE EU ETS (3)
■ Border levelling measures:
■ Protect businesses in the EU from unfair
competition.
■ Prevent ‘leakage’ of industries out of the EU.
■ Solve the problem of ‘import emissions’.
■ Controls on imports fit naturally into the
upstream model.
■ A reformed EU ETS may pave the way for a
global system of upstream controls (next).
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13. ADDITIONAL BENEFITS OF A GLOBAL
SYSTEM OF UPSTREAM CONTROLS (1)
■ No need for legally-binding national targets:
■ Much easier to ensure compliance by the operators of
coal mines, oil wells or gas wells than to put whole
countries in the dock if they fail to meet their targets.
■ Much less confrontation and resistance in international
negotiations.
■ Negotiations can shift from the ‘burdens’ of cutting
emissions to the benefits and opportunities of new green
economies.
■ There is still a useful role for informal national targets
and national initiatives.
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14. ADDITIONAL BENEFITS OF A GLOBAL
SYSTEM OF UPSTREAM CONTROLS (2)
■ No need for special arrangements for
international aviation or shipping.
■ No need for special provision to deal
with loose targets from the past or
with the problem of ‘hot air’.
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15. ADDITIONAL BENEFITS OF A GLOBAL
SYSTEM OF UPSTREAM CONTROLS (3)
■ Simplifications can reduce problems
arising from complexity itself:
■ Causing negotiations to become bogged
down in a multiplicity of options;
■ Providing opportunities for narrow
interests to skew things in their favour;
■ Multiplying the costs of administration;
■ Multiplying the opportunities for fraud.
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16. GETTING THE SNOWBALL ROLLING
■ Upstream reform of the EU ETS can
serve as a demonstrator and provide
incentives for a global system of
upstream controls.
■ There would be a snowball effect
because the incentive would become
progressively stronger with increasing
numbers of ‘upstream’ countries.
■ LET’S START THE SNOWBALL
ROLLING!
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17. MORE INFORMATION
■ URLs:
■ www.k2support.org
■ www.kyoto2.org
■ “Turn off greenhouse gases at
source” (2 pages).
■ “Upstream reform of the EU
Emissions Trading System” (8
pages).
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