PROPOSED: USE TRADING FEES TO STIM NEW ENERGY

A superb example of how the EU cap-and-trade system is still discovering pitfalls and possible solutions in its emissions trading scheme. This pioneering work is absolutely invaluable to all the world’s economies.

Carbon windfall to go to clean energy: official
September 26, 2007 (Reuters)

WHO
European Commission (EC) (Fabrizio Barbaso, deputy director general for energy, EC energy and transport directorate)

The EU countries all have ambitious goals for developing renewable resources. The simple, new idea described here could help pay for the ambitions. (click to enlarge)

WHAT
Some EC officials advocate using fees and profits from the European Union (EU) Emissions Trading Scheme (ETS) to fund renewable energy development.

WHEN
Phase 2 of the EU Kyoto Protocols-complaint cap-and-trade emissions reduction market begins in 2008 and runs through 2012. Decisions and recommendations for the 2013-opening Phase 3 are now being planned by the EC.

WHERE
The EC is based in Brussels. Barbaso’s remarks were made in Milan.

WHY
- The EU ETS has proved that emissions permits hold their value better when a portion are auctioned rather than allocated. This generates income, potentially tens of billions of euros.
- Utilities purchase the permits at auction but arelikely to pass on the cost to consumers.
The cost can be returned to consumers by using income beyond what is needed to operate the market to further the development of emissions-free energy sources.

This chart requires a little study. The payoff: Understanding the risks and rewards of an emissions constrained marketplace. (click to enlarge)

QUOTES
Barbaso: "(We want) to use revenues to promote new technologies for the renewable energy sector…In my view the best solution will be full (auctioning). I'd prefer to go for a radical change…It's still subject to discussion with member states and experts."