What You Won’t Hear Today at the Senate Committee on Energy and Natural Resources Roundtable Discussion on the EU Emissions Trading Scheme

Contact: Jody Clarke, 202.331.2252

Washington, DC, March 26, 2007—The Senate Energy and Natural Resources Committee is meeting today to discuss the European Union’s (greenhouse gas) Emissions Trading Scheme, but the committee won’t be hearing from anyone with any real world experience with it. Instead committee members are only hearing from ideological supporters of the ETS.

The leading assessment of the Emissions Trading Scheme (ETS) is from the United Kingdom think tank Open Europe. “The High Price of Hot Air: Why the EU Emissions Trading Scheme is an environmental and economic failure” (http://www.openeurope.org.uk/research/ets.pdf) offers the following conclusions:

“Botched central planning, rather than a real market. Instead of auctioning off permits and allowing the market to operate, member states have handed permits out to firms according to 1960s-style National Allocation Plans (NAPs). This means handing permits free to individual firms on a variety of rather sketchy criteria. This attempt at central planning has had all kinds of perverse results. For example NHS hospitals have been forced to spend a total of £1,300,000 buying up permits, and 18 UK universities are also net contributors. Ironically, large oil companies have made substantial profits from the scheme.”

“An administrative nightmare. Compared to an energy tax or focused emissions tax on power stations, the scheme is complicated and has imposed very high administrative burdens. Many small plants – for example the main boiler in a hospital – are covered by the scheme, and have to employ staff to conduct monitoring, and compliance activities, and pay for official verification. Despite this, such plants contribute little to total emissions. The estimates in the UK Government’s preliminary Regulatory Impact Assessment suggest that this administrative burden is costing firms and public sector bodies approximately £62 million a year in the UK.”

Heritage Foundation analyst Ben Lieberman in his recent paper, “Frequently Asked Questions About Global Warming,” (Heritage Foundation Web Memo #1403, March 21, 2007, http://www.heritage.org/Research/EnergyandEnvironment/wm1403.cfm) answered the following question:

“Q: Isn’t the Kyoto Protocol a success in Europe?

No. The European Union nations that have signed onto the Kyoto Protocol—and regularly criticize the U.S. for failing to join them—are falling considerably short of its requirements. Despite the caps on carbon dioxide emissions, nearly every Western European nation has higher carbon emissions today than when the treaty was signed in 1997, and these emissions increases show no signs of leveling off. Compliance with Kyoto’s looming 2008–2012 targets will be all but impossible for most of these countries, and many are actually seeing their emissions rising faster than those in the U.S.”

REAL WORLD EXPERIENCE WITH EUROPE’S ETS, IGNORED BY SENATE ENR:

The following are quotes from news articles citing the real world impact of the EU’s Emissions Trading Scheme:

“Tom Crotty, chairman of the chlorine producer Ineos ChlorVinyls, said that spiraling energy costs had led to the loss of 100,000 job losses over the past 18 months. Included in those losses were the closure of 13 glassmakers and 11 papermills. Ineos ChlorVinyls, which had to halt production temporarily last year because of higher energy costs, has 80 per cent of its costs tied up in energy. Mr Crotty said that energy policy had failed industry: ‘The true cost comes in lost business, lost jobs and lost income’.”  Times (UK), November 28 2006

“Arcelor Mittal, the world’s largest steel company with 135,000 workers in Europe, is among several companies that are sending out distress signals two years after the EU began capping carbon dioxide emissions from 10,000 factories and power plants. Tougher EU policies to cap emissions ‘could threaten two of our plants’ because they would significantly raise costs, Wurth said during a recent interview. Instead of battling pollution, he argued, the measures were encouraging “less production in Europe and more imports from places with fewer environmental regulations”—a result that Wurth deemed ‘absolutely ridiculous’.” International Herald Tribune, January 7, 2007

“For other industries, the main concern is the higher cost of electricity, which was exacerbated by the introduction of emissions trading. The Norwegian company Hydro has closed two aluminum units in Germany since 2005 because of high power costs, in part citing tough environmental laws in Europe. A Norsk Hydro spokesman, Thomas Knutzen, said his industry would make new investments mainly in countries that ‘do not have obligations to reduce their CO2 emissions through Kyoto.'” International Herald Tribune, January 7, 2007

“The emerging large increases in electricity prices and their potential impacts on international competitiveness are a major concern for energy-intensive industries.  A full analysis of the impacts of the ETS and appropriate improvements is critically needed.” Union of Industrial and Employers Confederation of Europe (UNICE), representing more than 20 million companies in 33 European countries [largest EU employer group], November 2005

Many energy-intensive companies face the dilemma whether to pay the excessive costs of complying with Kyoto, or redirect investments to other countries, as has Acernox, the world’s second-largest stainless steel manufacturer… CEO Victoriano Muñoz repeatedly warns of Kyoto creating a “very grave” situation for Spanish industry, “forc[ing] us into a second industrial restructuring.” In his opinion, “Kyoto is one of the biggest problems Spain will have to deal with in the coming years.”

Translation courtesy of Dr. Gabriel Calzada, quoting Munoz from the Spanish press; see also “Three Spanish companies closed down for violating Kyoto Protocol,” Spain Herald, August 9, 2005.

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