Nov. 26, 2007
British think tank Open Europe warned in June that "fundamental" design flaws will result in failure of the EU's carbon trading scheme (ETS) to reduce industrial emissions during the scheme's second phase (2008-12).
The report, Europe's Dirty Secret: Why the EU ETS Isn't Working, predicts that credit oversupply from carbon offset projects in developing countries will submerge the market. Such an oversupply could, in turn, deflate carbon prices and make it difficult to achieve domestic cuts in Europe, the report says, adding that carbon permits, which cost next to nothing for first-phase compliance, will jump to approximately EUR 19 per tonne during phase two.
The report also argues that Kyoto's flexible mechanisms will allow installations to purchase allowances on the international market — a practice disallowed in the first phase that will drive up external credits.
European Commission spokeswoman Helfferich, according to ENDS Europe, rejected claims that the second phase will prove a failure, adding that use of "dirty secret" in the report title is inappropriate because the commission was transparent in addressing any potential problems.
