Are EU policymakers considering spending EU Emissions Trading System (ETS) funds in favour of coal? It surely seems so if one examines carefully the recent history of the ETS, writes Nikos Mantzaris.
Nikos Mantzaris is energy and climate policy expert at WWF Greece.
In February 2017 the European Parliament sent a loud and clear message by setting specific, coal-excluding standards as eligibility criteria for poor member states access to the ETS funds, including the Modernisation Fund.
It also voted for a long overdue measure of fundamental importance in achieving the overall decarbonisation goal of the ETS: The establishment of a Just Transition Fund with auctioning revenues from 2% of ETS emission allowances, which would be used to financially support the communities and economies of the most vulnerable, coal-dependent regions.
It was the first time an EU institution proposed specific measures to address this real problem in a concrete and socially just manner, instead of vague and empty promises.
But two weeks later, Environment Ministers took a different stance. The text they agreed on as the position with which the European Council would enter the trilogue negotiations, contained no mention of a Just Transition Fund despite the Greek Minister’s efforts to include it as well as calls from civil society organisations and trade unions. In addition, the ministers opposed the European Parliament’s reference to a CO2 emission limit value as an eligibility criterion which would exclude coal-related investments from the Modernisation Fund.
Instead, the text included a big loophole which would still allow funding of coal-powered plants. This position was in clear contrast with the very purpose of the ETS funds, which should reduce pollution and help poorer Member States in their transition towards clean energy instead of subsidising old and harmful coal plants, thus extending their life.
Several months later, the compromise proposal by the Estonian Presidency takes further steps backwards, as it strengthens the loophole by specifying the percentage of the Modernisation Fund’s contribution to the corresponding investments, insists on excluding the Just Transition Fund, as well as eligibility criteria which would prevent coal plants investments via ETS funds, it increases the free emission allowances given to the electricity sector of the poor Member States by 50% and declares the will of the Council to discuss the size of the Modernisation Fund.
One might wonder what took place in between.
In between, Poland came up with a new list of demands: elimination of all CO2 emission limit values that exclude coal from ETS funds for the sake of “fuel neutrality”, increase of free emission allowances given to the electricity sector of the poorer Member States from 40% to 60% and doubling of the allowances for the Modernisation Fund from 2% to 4%.
It is clear that if the Modernisation Fund doubles, as the Polish Minister demands, there will be no room for the establishment of a Just Transition Fund. Knowing that and despite its beneficial impacts for several regions in Poland where coal plants are being restructured, the Polish government excluded the Just Transition Fund from its latest list of demands from the EU regarding ETS funds.
In between also, mayors from eight coal-dependent regions in Greece, Romania and the Czech Republic, and the presidents of two trade unions co-signed a plea for the establishment of the Just Transition Fund.
The letter explained the desperate situation their municipalities are facing in the next few years due to the retirement of coal plants, the escalating unemployment rates and the drastic decline in local income. It further emphasised the importance of establishing a Fund at the EU level which could support the transition to the local economies in response to these changes.
European Commissioner Arias Canete’s reply clarified that the Just Transition Fund is important and still on the table. However, it now becomes clear whose calls the Estonian presidency had more sympathy to in drafting their compromise text.
When it comes to the heart of the matter and contrary to the Polish Minister’s plea for fuel neutrality, it is an undisputed scientific fact that climate change is not fuel-neutral. Coal is by far the most polluting fuel and therefore its use should be gradually phased out.
Moreover, EU leaders like to claim leadership in fighting climate change in every opportunity, whereas transition of coal mining regions is clearly an urgent issue of social justice, which supposedly constitutes one of the core EU values.
The most recent initiative of seven of the richest member states to plea for an exclusion of coal from the Modernisation Fund is in the right direction. However, they must also understand that establishing a separate Just Transition Fund with 2% of the ETS is not only fair for poorer member states heavily dependent on coal but constitutes an absolute prerequisite for not leaving behind one-third of the EU en route to a clean energy future.
So, the dilemma is clear: Will the environment ministers walk the climate leadership talk or will they condemn the poorer member states to a coal-dependent future? Will they succumb to pressure from vested interests, or will they rise to the occasion and choose the socially just route to a gradual phase-out of coal for all EU member states?
Just Transition or a coal-plagued nightmare?