Paul Taylor, a contributing editor at POLITICO, writes the Europe At Large column.
PARIS — Ursula von der Leyen convinced reluctant politicians to wave her through as European Commission president in part thanks to an ambitious pledge to implement a “European Green Deal” within her first 100 days in office.
Now that her rejigged team has finally won approval by the European Parliament, she’ll need to prove she’s serious about pursuing her goal of making Europe climate neutral by 2050.
How? Von der Leyen should propose fixing a minimum price for carbon in the EU.
To be sure, putting a floor under the EU’s existing Emissions Trading System (ETS), on which carbon prices have yo-yoed unpredictably for 15 years, carries risks.
It will require comprehensive policies to safeguard industrial competitiveness, promote carbon-free mobility and cushion the social impact to avoid the kind of violent backlash that France’s attempt to raise energy taxes sparked last year with months of nationwide Yellow Jackets protests.
Now, von der Leyen will need to prove she’s serious about pursuing her goal of making Europe climate neutral by 2050.
The price itself would also have to be adjusted annually on the basis of scientific advice to be compatible with the commitment to limit global warming to less than 2 degrees Celsius above pre-industrial levels by the end of the century.
But putting in place a minimum price would accelerate cuts in carbon emissions and provide electricity generators and manufacturers with legal certainty and predictable long-term incentives to invest in low-carbon technologies.
It would also be a practical response to the wave of concern about the global climate emergency expressed in this year’s European Parliament election, and in weekly youth protests across the world.
European Commission President Ursula von der Leyen, front, pink jacket, with her team of new commissioners in Strasbourg | Patrick Seeger/EPA
Perhaps most crucially for the new Commission, it would buttress the EU’s ambition to lead the fight against climate change, which will be tested at this month’s United Nations COP25 climate summit in Madrid, where von der Leyen will spend her first working day in office on Monday.
The current cap-and-trade scheme — introduced in 2005 as the cornerstone of the EU’s climate policy — was supposed to make businesses buy allowances at auction and trade them so that market forces forced the power sector and energy-intensive industries to adapt and reduce emissions.
But it has been dogged since its inception by low, volatile prices and undermined by years of oversupply of permits to pollute — many of them handed out free in an effort to keep European industry competitive. This year alone, the price of an ETS allowance to emit a tonne of carbon has fluctuated between €16 and €30. It currently stands at around €25.
When I asked former Environment Commissioner Connie Hedegaard why she did not introduce a minimum price after the cost of a tonne of carbon slumped below €5 on her watch in 2010-14, she blamed industry lobbying. “There are so many interests that do not want to see any interference in this market-based instrument,” she told me.
Other factors played their roles as well. The double-dip recession of 2008-09 and 2011-13 drove down energy consumption, for example, and Germany’s 2011 decision to phase out low-carbon nuclear power blew Europe’s biggest economy off course to meet its emissions reduction target. Only since this year has a Market Stability Reserve enabled the EU to withdraw surplus emissions allowances and respond to market shocks.
The EU’s current cap-and-trade scheme has been dogged since its inception by low, volatile prices and undermined by years of oversupply of permits to pollute.
In the absence of a Europe-wide floor, some countries, such as the U.K. and the Netherlands, are acting nationally to try to underpin the market. But rather than a patchwork of national measures, Europe needs a common approach.
In her July address, von der Leyen declared that carbon emissions must have a price and called for the ETS system to be extended to shipping, transport and construction. But she has stopped short of proposing a mandatory floor price so far. In part, this could be because the idea is opposed by German power generators, which are already struggling with the cost of phasing out nuclear energy by 2022 and scaling back coal-fired power stations.
Ursula von der Leyen speaks to European Parliament | Frederick Florin/AFP via Getty Images
Von der Leyen should note instead that Germany is going green faster than many had anticipated. The government — wary of the rising Green Party, which has been snapping at the heels of Chancellor Angela Merkel’s conservatives — adopted a substantial energy transition package in September. It included for the first time a fixed carbon price for the transport and heating sectors, starting at the low level of €10 a tonne in 2021 and rising to €35 by 2025.
France and Germany endorsed the idea of a floor price at a summit in October, but Frans Timmermans, the executive vice-president who will be in charge of the European Green Deal, brushed aside the idea at his confirmation hearing earlier this year, saying he didn’t see the need since the carbon price was going in the right direction.
As other countries pick up the pace, it’s in von der Leyen’s interest to get ahead of the curve.
Encouragingly, a non-governmental task force of veteran European politicians, industrialists and economists, led by former French Finance Minister Edmond Alphandery, has been working quietly with Chinese counterparts in Beijing to establish a convergent price for carbon. They produced a call for a joint EU-China initiative at their most recent meeting in New York in September, which was published on the front of the official China Daily.
As other countries pick up the pace, it’s in von der Leyen’s interest to get ahead of the curve.
The fact that the world’s number two economy — which is slated to introduce a national carbon emissions trading scheme next year modeled on the EU system — is interested in working with Brussels on this is another reason for von der Leyen to seize the initiative.
Her European Green Deal needs a flagship measure that will give it credibility and visibility as the centerpiece of her presidency, like Jacques Delors’ pledge to complete the EU’s single market by 1992.
Without one, it risks falling short of Europe’s climate ambition.