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Is the EU's carbon market at risk?
carbon, solar, recycle, climate, renewable

The EU carbon market is at sixes and sevens following a ruling from the First Court of Instance that the EU doesn’t have the right to lower carbon targets for both Poland and Estonia. The fear is that the ruling, which says that carbon limits are a matter for Member States, could undermine the infrastructure of the EU’s Emissions Trading Scheme.

Following the ruling, carbon traders have warned that the market could become increasingly unstable. The EU ETS has been dogged with problems since its inception, with accusations that it handed out too many free permits to emitters in its first phase, that it was too generous in emissions targets or conversely, that it was stifling EU industry by limiting emissions.

The problem with the ruling is that for the market to have any effect, it’s reliant on a stringent cap that can, and will, be enforced. If Member States are allowed to manage their own emissions targets, the system could fall apart. While, according to a statement from the EU’s Environment Commissioner Stavros Dimas, neither Poland or Estonia will be allowed to issue new allowances for CO2 emissions at the moment, it’s clear that there is a disconnect between the EU’s stated goals and its legal framework.

We only have to look at the difficulties being experienced by negotiators in the run up to the post-Kyoto treaty meeting at Copenhagen in December, to see what problems are being experienced.  It is difficult for any large group with strongly different political and economic agendas, to reach an agreement on a treaty that affects every party in a different way.

To make it more difficult, Poland and Estonia are not the only countries challenging EU imposed limits – Bulgaria, Hungary, Latvia, Lithuania and Romania are also unhappy. The former CEE countries believe that they need more time to develop economically if they are going to be able to operate in competition with other EU states. Given that this is a similar argument to that used by developing countries to avoid emissions targets under Kyoto, this could escalate into a significant problem.


While the market is still young, and obviously experiencing growing pains, the ruling comes at a bad time. Given that the EU is still struggling to agree an EU wide position on CO2e targets ahead of Copenhagen, the announcement could prove a serious blow to the EU’s climate change aspirations.

Posted via email from Conquering Carbon


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