Monday 7 April 2008

WWF commissioned Point Carbon, a world-leading provider of information and analysis on carbon markets, to carry out a study assessing the potential and scale of windfall profits to the power sector in the UK, Germany, Spain, Italy and Poland. Over the second phase of the scheme, which is set to run until 2012, the report shows that overall profits to the power sector in these countries could be as high as €71 billion.

Scores of new coal stations

Burning coal to generate electricity already accounts for about 1 billion tonnes of CO₂ emissions per year within Europe - or about 20% of all EU's greenhouse gas emissions - and its grip on the European power sector looks set to increase. But according to a new report commissioned by WWF, the EU Emissions Trading Scheme continues to allow this heavily polluting form of energy to gain billions of euros from a scheme originally created to reduce emissions.

"There are currently plans to build 40 major new coal fired power stations in Europe in the next five years. These are expected to run for 50 years or more and could lock us in to decades of soaring emissions" said Kirsty Clough, Climate Change Policy Officer at WWF-UK.

"Now more than ever, it is vital that the power sector is made to face up to the true cost of carbon, before the environment pays it for them," she added.

Pollution allowance not working

The EU ETS is Europe's flagship policy to address climate change and was created to put a limit on the amount of emissions created by large industrial polluters. If emissions produced by a company involved in the scheme exceed agreed levels, that company will face heavy fines, unless it purchases pollution permits as a way of offsetting the excess. As a result, the allowances have both a carbon value - every tonne of CO₂ is equal to one pollution allowance - and a monetary value. Currently though, EU Governments give companies many of these allowances for free.

"Handing free pollution permits to power companies is like handing them a cash bonus as, in the lack of international competition, they simply pass on the value of the permits to their customers," said Clough.

"The report shows that in the UK, windfall profits to the power sector could be as high €15 billion by 2012," she explained.

EU negotiations

The EU is currently negotiating how the ETS will work from 2013 onwards and has proposed that the power sector should have to buy all of the pollution permits it needs to cover emissions. WWF feels it is vital that this major contributor to climate change is held to account for its emissions and that such proposals survive the political process.

Free handouts of pollution allowances to the power sector must not be allowed to continue after 2012. The revenues from the sales and auctioning of pollution permits need to be fully re-invested in climate change protection both in Europe and developing countries.