By Will Nichols, Source: BusinessGreen

More than 30 leading companies from across Europe have called on EU policy makers to back moves to bolster the flagging emissions trading scheme (ETS).

A European parliamentary committee is set to vote next week on whether to support a so-called backloading plan to boost the carbon price, which would see the sale of 900 million carbon delayed until a later date.

The European Commission hopes this backloading will reduce the huge surplus of allowances that has been blamed for driving the price of carbon to below €3 per tonne.

Companies including E.ON, Shell, GE, Kingfisher, Unilever and DONG Energy are among the signatories of an open letter sent to members of the committee warning that the current carbon price is too low to stimulate low-carbon investments or drive green innovation.

The letter, which is also supported by Vestas, Areva, Alstom, Statoil, Doosan and First Solar, adds that without urgent intervention by Brussels the price will fall even further, “threatening the long-term survival of the ETS”.

“Action is required to restore the credibility and relevance of the EU ETS,” the letter reads. “[Backloading] is a necessary and important first step paving the way for essential structural measures to ensure the integrity of the EU ETS.”

Some analysts have argued that backloading will merely delay the oversupply problem afflicting the market. As such experts warn that withholding allowances must be supported by either an increase in carbon reduction targets from 20 per cent on 1990 levels to 30 per cent to increase demand for carbon credits, or the permanent removal of allowances from the market.

Many Western European countries are in favour of the backloading plan, including the UK, but it is opposed by coal-rich Poland, which says there is no reason to interfere in the market.

The letter comes the day after campaign group WWF released a report arguing the EU could meet its entire energy demand from renewable sources by 2050, if member states agree to ambitious energy policy goals.

These include reducing energy consumption by 38 per cent against business as usual by 2030, and generating 40 per cent of energy from renewable sources by the same date. By meeting both these targets the EU could halve its energy-related greenhouse gas emissions, the report says.

“Improving on Europe’s 2020 climate and energy targets by introducing an ambitious package of post-2020 measures is a win-win situation for everyone,” said Jason Anderson, head of climate and energy at WWF’s European Policy Office. “It would not only help reduce the impact of climate change, including huge health and environmental costs, but it would also help generate up to five million jobs, significantly boosting the economy.”

In other carbon market news, the UN’s climate change secretariat, the UNFCCC, has signed a deal with the East African Development Bank (EADB) to establish a joint office in Uganda with the aim of increasing the region’s participation in the UN’s carbon offset scheme, the Clean Development Mechanism.

The centre in Kampala is the second to be established in Africa after a similar office was established in Lomé, Togo, a few months ago to target CDM projects in Francophone Africa.

The CDM has more than 6,000 accredited projects generating tradable offsets that developed nations and companies can purchase to help meet their emissions reduction commitments under the Kyoto Protocol.

However, prices of these allowances have plummeted in recent years, prompting UN calls for more demanding emissions targets as a means of increasing demand in the market.

Analysts fear that without an increase in demand for credits the price of CDM offsets will continue to fall, undermining the viability of many emissions reduction projects in developing countries.

But Peer Stiansen, chair of the CDM executive board, insisted there was still a strong case for developing further CDM approved projects. “There is a great deal of untapped potential for CDM in Africa,” he said “The regional collaboration centres aim to tap the potential of carbon offset projects on the continent.”