ETS – it's a start
August 1st 2008

Jonathan Wilson from EnergyQuote discusses the efficacy of the emissions trading

scheme with Tim McManan-Smith

Phase I of the EU ETS (Emissions Trading Scheme) has been criticised for for failing to be stringent enough."It was a mess and it didn't work,"was Environment Minister Phil Woolas' succinct summary. But EnergyQuote's Jonathan Wilson is less scathing."Phase I was successful in that it got all the parties to the table. It was loose enough to get everyone involved, so politically it was a success.Where it was not a success was in the experience and understanding of emissions allocations."

"Carbon and energy efficiency have been brought to the fore by the ETS", says Wilson,"Carbon, due to achieving a value through the ETS, is the catalyst for looking at cost improvements, energy efficiency and competitive issues."

Energy management to reduce emissions

The Carbon Trust is doing a good job in promoting carbon management, reckons Wilson, but action is often lacking."After a company has an energy audit it needs a business case as to why it should do something.Often the results are not specific enough.They are too open and don't deliver the level of detail required to justify improvements," says Wilson.

Carbon reduction committment

The carbon reduction commitment (CRC) is imminent yet many companies have not acted.Wilson says that some comapnies could be under the threshold is they acted now and had a lower 2008 baseline.

As for companies that are definitely included he believes that acting early is not a minus.There is a theory that if you have to save energy when you are in the scheme then it would be better to put off energy efficiency projects until the scheme has started.Wilson says that this is a false economy,"Energy efficiency does not happen overnight.The capability to lower energy increases if you have a plan in place and this takes time. It is a slow, steady move".

EU ETS now and the future

With regard to the effectiveness of Phase II, Wilson states that with prices presently in the mid €20s/t, it appears to be working. By the end of the year it is forecast to be €28-30/t, although people need to keep an eye on Russia (it has a significant number of certificates available due to its recent recession which could crash the price). He says the National Allocations plans are still too loose for the system to be total success but,"Phase III will see significant reductions and it will then start to bite."

Wilson believes that for the uptake of renewable energy projects by business to be significant then the price of carbon needs to be in the region of €35-45/t. The EU's desire for this happen, however, will weaken if there is a recession."If the economy is strong and energy prices high there will be a significant investment in low carbon technologies. But investment to date is not insignificant, already outweighing the dotcom boom investment."

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