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Decisive Korea v Divisive Poland: Part two of ‘The EU-ETS: Fix it or shut it down’

This is the second of a two-part blog on emissions trading systems. Read the first blog: The EU-ETS: Fix it or shut it down, please.

According to the Financial Times on 16 April, “Poland is insisting there should not be any “administrative meddling” that would prop up prices in the European Union’s carbon market – the world’s largest ….”  A few days later, according to Reuters, the Polish Environment Minister Marcin Korolec, said:  “It is one thing to introduce a mechanism. We don’t have a right to manipulate it,” he said. “How can you guarantee that this first manipulation will work and actually produce results?”

That’s rich, given that the EU-ETS is a regulatory creation and therefore “administrative meddling” is what it’s all about.

And while we are on the topic of “administrative meddling,” perhaps the Polish Minister might want to consider that Governments are (partly at least) about “administrative meddling”?

Poland has signed up to the EU’s target to reduce greenhouse gas emissions by 20 per cent from 1990 levels by 2020, and has agreed to the EU’s longer-term target of reducing emissions by 80 to 95 per cent by 2050.  However, Poland vetoed proposals setting out milestones to achieve that 80 to 95 per cent goal because it claims this would harm its economy and blocked a proposal to increase the EU GHGs cut to 25 per cent by 2020.

Here’s the Polish Environment Minister at it again, this time according to the BBC:  “For countries like Poland such a reduction (in emissions), with our starting point today of basing 93 to 95 per cent of our electricity from coal, would mean, firstly, extremely high prices for electricity in 2050, and secondly, the transfer of industry outside Poland’s borders.”

So let me see if I have this one straight:  Poland signed up to the commitments of its partners but didn’t really mean it, or didn’t know at the time that it didn’t really mean it.  With Europe in an economic and existential crisis, Poland deems it the right time to expose more European divisions by advancing arbitrary and self-serving (or at least they think it’s self-serving) arguments.  Great!  Clearly now is not the right time for Poland’s environmental minister to pay much attention to the impact of his argument on his own citizen’s healthcare; on the coal subsidies shackling his economy; or on Poland developing with the help of its European partners a more sustainable economic model, exporting greener goods and benefiting from energy efficiencies.

Kurt Bock, Chief Executive of BASF, weighed in on the side of the Polish minister in a recent FT article, warning the EU “that it risks undermining the continent’s industrial competitiveness if it tampers with the emissions trading scheme” and cautioning that “any artificial [energy] cost increase goes against [Europe’s] global competitiveness.

Contrast the position of Europe’s showcase coal-fuelled economy (and that of a large European MNC) with recent developments in Korea, where 148 out of 151 members of parliament approved a bill on 2 May 2012 to establish a cap-and-trade system by 2015 to cut carbon emissions, thus ensuring Korea joins Australia and China at the vanguard of Asian economies committed to building green economies.

The long-term benefits to competiveness from being more energy-efficient and exporting greener goods are clear to fast-growing, low-unemployment Asia but aren’t clear to the economic bloc that actually needs growth and employment:  The Koreans get it but the Poles (and some European MNCs) don’t.  The EU should either fix the EU-ETS in order to ensure it is fit for purpose, or it should chuck it.

Assaad Razzouk is Group CEO of Sindicatum Sustainable Resources, a global sustainable resources company headquartered in Singapore.

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