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Europe must agree 2030 carbon target

The CBI is calling for political agreement on a new European energy and climate change package by 2014 to guarantee the future of the Emissions Trading System (EU ETS).

Ahead of publication of the European Commission’s Carbon Market Report on Wednesday, the UK’s leading business group argues that a successful carbon market is essential if Europe is to create sustainable and secure growth, but at the moment the EU ETS is not incentivising investment.

Targeting 2030: Giving the EU ETS a Long-term Future (pdf)>>

While the recession has caused the carbon price to drop, the real reason the EU ETS is not delivering is its short-term focus, with an emissions cap only until 2020.

Rhian Kelly, CBI Director for Business Environment policy, said:

“Investors are ready for the low-carbon race, but right now they can’t see the finishing line. Europe urgently needs a 2030 carbon target to give investors the confidence to get going.

“Emissions trading is key to unlocking business investment in low-carbon technology to help get the economy growing. But at the moment the carbon market is not delivering for Europe because of its short-term focus.

“Without a long-term plan, the short-term changes being debated now are just tinkering with the market and won’t do anything for investor confidence.”

The European Commission’s current proposal is to change the timeline on which emissions permits are auctioned, but this idea – otherwise known as ‘backloading’ - is not the answer.

The EU ETS needs a long-term future to give businesses the confidence to ramp-up investment, with a 2030 emissions cap set in-line with an EU-wide emissions target for the same year. Only with this in place should short-term measures – like ‘backloading’ – be considered.

Ms Kelly argued that:

A critical part of EU ETS reform must be smarter support for European energy-intensive businesses. Currently, a few key industries are at risk of ‘carbon leakage’, where investment in Europe is deterred by the costs of the EU ETS, flowing instead to countries with lower environmental standards. This is especially the case for businesses which are heavy electricity users, who receive no systematic support at EU level.

She added:

“There is an important section of the business community not being considered in the current carbon market reform proposals. Energy-intensive businesses make a direct and significant contribution to economic growth and are a vital part of the low-carbon future. The Commission must make improving support for these businesses an integral part of its carbon market reforms.”

Further details can be found in the CBI policy brief, Targeting 2030: Giving the EU ETS a Long-term Future

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