Energy  |  Publications  |  28.06.2011

Cap or trap: how the EU ETS risks locking-in carbon emissions

A report by Sandbag critically evaluating the performance and prospects of the EU Emissions Trading Scheme as it currently stands, arguing that it has the potential to hinder attempts to move towards a low carbon economy. 

It explores how Phase 2 caps have been weakened by recession, and how the slack from Phase 2 - in the form of unused offset credits – can be carried over into Phase 3. It also explores how certain undeserved surpluses have accrued to specific sectors and companies within the EU ETS.

An already weak cap for this period became a severe over allocation of pollution permits when the recession caused a sharp drop in production and therefore carbon emissions. These lower emissions, far from helping Europe towards a low carbon future, may actually trap it into continued high carbon economy because the ETS allows the huge volume of unused permits to be carried over into the next phase of the scheme that runs from 2013-2020. The ETS in its current form is therefore in danger of hindering the transition to a low carbon economy for years to come.

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