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EU Business Leaders Say ETS Cheap Carbon Prices Hurt Green Investments

Leaders of some of Europe’s largest businesses – including Shell, Alstom, Deutsche Telekom, Philips, Skanska, Tesco, Unilever and Vestas – called on the EU’s politicians to recalibrate the EU Emission Trading Scheme (ETS) in order to bring stability to carbon markets.

The business group The Prince of Wales’s EU Corporate Leaders Group on Climate Change (EUCLG) sent a letter to EU decision makers including President Barroso and EU Commissioners saying that the economic crisis has significantly impacted the effectiveness of the EU ETS causing the current low levels of trading and carbon price.

According to EUCLG, stabilizing the ETS is necessary to spur innovation and drive green investment.

At a four-year low, EU carbon permits for December fell 8.3 percent to 6.45 euros on December 13 at the ICE Futures Europe exchange, for a year-to-date loss of 55 percent. This is attributed to speculation that euro-area debt crisis may worsen and concerns that oversupply of permits may increase following the introduction of new energy-efficiency legislation in Europe, Bloomberg reports.

The group suggests that the price of carbon must increase and reach a level that will make low-carbon investments, such as offshore winder power, more competitive. Among their recommendations, the group wants allowances to be withheld from auctioning in ETS Phase III.

The ETS is now in its second phase that ends in 2012. In the third phase from 2013 through 2020 the EU will be moving toward auctioning, gradually phasing out the ETS free permits, Bloomberg reports.

The letter comes ahead of a review of the European Commission’s “A Roadmap for moving to a competitive low carbon economy in 2050” by the European Parliament’s ENVI Committee in January 2012. The roadmap report, released in March, discusses the idea to set aside allowances.

The downward pressure on carbon prices from the economic crisis could be exacerbated by EU energy efficiency rulings, EUCLG said. In the letter, the group asks for an energy policy in alignment with the goals of the EU ETS as Europe’s “flagship” policy to drive decarbonization.

Photo: EU CLG

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