Plagued with cases of fraud and low CO2 prices due to the crisis, will the EU carbon market be able to encourage companies to invest in green technologies?

Reporter: The EU Emissions Trading System

https://api.multimedia.europarl.europa.eu/documents/20125/15779396/m003-0163-en_mf.srt

Does the European carbon market  still have a future?

With the economic crisis, the price  of a tonne of CO2 has collapsed.

Is this pillar of the climate package  still playing its part

in encouraging companies to invest  in green production technologies?

The carbon market concerns  12,000 industrial installations in Europe.

Each year the EU States allocate them  an allowance of CO2 emissions.

can buy additional emission allowances  on a trading exchange.

We went to Paris  to the offices of BlueNext,

one of the platforms  where CO2 quotas are traded.

We're at the heart of the carbon market.

This is where buyers and sellers  make their transactions.

Buyers and sellers confront  each other in one place,

which is represented here  by what we call an order book

where you find buying and selling prices.

For example, on this line  we have the best buyer

who's prepared to pay 8.34 euros  per tonne of CO2

and next to him we have  the best seller at 8.42 euros.

So we can consider  that the price of carbon today

is between 8.34 euros  and 8.42 euros per tonne.

In July 2008, the price of  a tonne of carbon was 29 euros.

But the carbon market  hasn't escaped the crisis.

The slowdown in activity means that  companies don't use all their allowances.

They don't hesitate to sell them  in order to gain immediate capital.

The market has an excess of emission  allowances and as a result rates drop.

But experts estimate that  30 euros per tonne of CO2 is the price

above which it's profitable  to invest in green energies.

We are calling on the Member States  to take immediate action

to withdraw at least 1.4 billion  allowances out of the market

and therefore ensure  that the price will go up

and will lead to real investment  in low-carbon technologies.

With the current prices  there is no real incentive

to invest in renewables  and energy efficiency

and to decrease  greenhouse gas emissions.

Environmentalists say that a minimum price  for a tonne of CO2 could be set,

but Christian de Perthuis doesn't agree.

He's an economist leading a research  programme on the carbon economy.

He thinks the supply of carbon quotas  in the market must be reduced.

One key to being able to turn around  and revive this market

which could have a similar function  to a central bank in the currency market

with the possibility of reducing  the amount of quotas placed on the market

the European carbon market  has had many problems,

and a gigantic VAT fraud with the massive  cost of over 5 billion euros.

The market has had some difficulties,  mainly due to its lack of maturity.

Today the market has gradually  recovered from its difficulties,

with harmonisation of the tax regime  to respond to the VAT carousel fraud

and, on the other hand,  more secure records

to prevent people coming  to steal or hack into these records.

2012 may be the year of resurrection.  New rules will come into force.

The market will cover other sectors,  like aviation,

Gradually, companies  won't be allocated quotas,

We can even talk about  a new carbon market.

The allocation of quotas via auction  will change a lot of things.

For companies, in practice  it will mean that,

instead of paying for CO2 above the cap  of a quota they've received for free,

they will pay for CO2  from the first tonne emitted.

Europe's CO2 trading  has had a slow start,

but it has shown the way  to other polluters in the world.

Australia will open  its trading exchange soon.

All these nations will be able to learn  lessons from the European model.