Fine Print: Greenwire finds the truth about the EU Cap and Trade "Success Story"

November 23, 2009 | Yael Borofsky,

Touted as a model for future U.S. cap and trade policy, the EU Emissions Trading Scheme (ETS) is on track to help the EU comply with their Kyoto Protocol obligations, according to a recently released EEA report and liberal climate bloggers. But a recent story by E&E News Greenwire published in the New York Times checked the fine print, and gets at the truth behind this "success" story: creative accounting.

Current greenhouse gas emissions from Western Europe still exceed their U.N. commitments, the report says, and 10 countries will have to rely on emissions trading, land-use changes or carbon offsets to meet their legally binding levels. In general, Mediterranean countries like Spain and Italy have been most delinquent about meeting their targets, the agency said.

Of the wealthy, older E.U. members, only France, Germany, Greece, Sweden and the United Kingdom are currently below their Kyoto agreements, the report says...

A close reading of the report reveals that European ambitions have only begun to catch up with the bloc's commitments, with many of the greenhouse reductions achieved by countries partially derived from secondary benefits, like the gasification of the energy industry in Britain or the economic collapse of the former East Germany.

The 15 Western European nations that accepted a joint target as part of the last U.N. climate deal -- which covers 2008 to 2012 -- committed to cutting emissions on average 8 percent below Kyoto's baseline, typically set at 1990 levels. Even with the help of the recession, emissions for the region sat at 6.2 percent below this baseline in 2008, and the most recent five-year average was 3.9 percent.

The gap is especially pronounced because of the inability of several southern countries to meet the reductions promised as part of the bloc's burden-sharing agreement, which divvied up the bloc's emission commitment in the late 1990s.

"This [emissions] average would have been substantially lower without the large absolute gaps observed between actual domestic emission levels and burden-sharing targets in Italy and Spain," the report says.

These countries will be joined by Austria, Belgium, Denmark, Finland, Ireland, Luxembourg, the Netherlands and Portugal in using Kyoto accounting mechanisms to close their emissions gap.

Some additional emission credits -- enough to increase the E.U. average by 1.4 percentage points -- will come from financing clean energy projects in the developing world. Improved forest management and other land-use changes will account for an additional percentage point, the report estimated.

Another 2.2 percent will come from excess emission credits purchased from other Kyoto members. Already, a host of European countries have purchased these credits from flush post-communist nations, largely through what are called green investment schemes, which seek to mollify criticisms that the emission credits amount to "hot air" (Greenwire, Nov. 9).

By using these accounting schemes, only Austria will be projected to be above its Kyoto commitments. Excess Kyoto credits from Germany, France and Britain will be essential for the region meeting its overall target, the report adds.

In addition to these fine print accounting tricks, countries still struggling to meet their targets will be "helped" over the next few years by the global economic crisis, whose impacts are not fully predictable.

Over half of the EU-15 obligations, 4.6% of the 8% reduction required under Kyoto, can be met by reductions that have nothing to do with transforming the energy sector of EU-15 economies (2.2% from buying excess "hot air" credits and project-based offsets from other countries, 1.4% from the increasingly suspect CDM and other Kyoto-based offsets, 1.0% from land use and forestry management).

Furthermore, of the reductions actually occurring in the EU-15, the "success" of two of the largest contributors, the UK and Germany, are due primarily to factors wholly outside the realm of climate policy: the dash-for-gas in Britain and the economic collapse of East Germany.

This is the logical end result of the targets and timetables obsessed policies of the Kyoto Framework. "Magical solutions" and creative accounting creates the illusion of success without actually impacting the way the EU makes and consumes energy. We'll leave it up to you decide if the EU's Kyoto experience should be the model of "success" on which to base future U.S. climate policy or if a there are more effective, direct ways to spur the emergence of a prosperous clean energy economy.