EU's carbon trade 'set to fail'

The European Trading Scheme (ETS) was launched in 2005 to cut carbon dioxide (CO2) emissions, but its success was limited, partly due to lax limits.

The wildlife charity is worried that the ETS' next phase will also "fail to deliver" significant emissions cuts.

Failure to cut carbon dioxide levels could cause irreversibly damaging climate change, scientists fear.

Good principle

"While the mechanism of carbon trading is sound in principle, the first phase of the EU scheme (2005 to 2007) has been seriously undermined by weak political decisions," said the WWF.

"The ETS could become a messy and deeply flawed market for a virtual commodity that only really benefits the traders"
WWF

Paying to pollute

The first phase of the ETS - which covered around 40% of the EU's emissions - has been accused by critics of falling short of its promises because the CO2 limits were not strict enough.

Moreover, the large polluters were given credits free of charge.

For firms that managed to cut emissions easily, they then had a surplus of carbon credits, which they could then sell for a profit.

Next phase

Now the EU has set new limits for the next phase of the scheme for a number of nations including the UK, Germany and Luxembourg. Others are yet to be finalised.

But the WWF's new report called Emission Impossible shows that the next phase of the ETS - which runs from 2008 to 2012 - could also fail "because of the potential for very heavy use of imported credits".

In practice this means that large polluters could buy carbon credits from projects overseas that claim to reduce emissions.

The WWF questions whether these projects are all genuine emission reduction plans.

The ETS could become "a messy and deeply flawed market for a virtual commodity that only really benefits the traders", WWF warns.

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