After the disappointment of the Copenhagen climate summit in December 2009, global warming campaigners have hoped UN climate change talks at Cancun, Mexico in December will thrash out a viable successor to the Kyoto agreement, which ends in 2012.
One of the toughest nuts to crack will be agreeing how road transport can be integrated within this new global anti-emissions deal. However, while accepting the difficulties of allocating responsibility for carbon between auto manufacturers, dealers and users, governments are accepting that one way or another, road transport has to play its part.
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Certainly, the UN Framework Convention on Climate Change secretariat has repeatedly made it clear that any serious action on climate change must include transport. The convention’s outgoing executive secretary Yvo de Boer has said: “We all need to think hard about the extent to which transport could be included in an emissions trading system established as part of the Copenhagen agreement. Linking the transport sector to an existing emissions trading scheme would allow for cost-effective reductions of greenhouse gas emissions across sectoral borders.”
The European Union’s (EU) ETS (Emission Trading System) is a case in point. Coming into effect in January 2005, with a system of national allowances for CO2 emissions allocated free of charge by national governments (which from 2013 should be auctioned), pressure to bring road transport into the system is mounting. As far back as 2007, Larsolov Olsson from the Swedish Environmental Protection Agency warned the European Transport Conference that road transport was likely to come into the EU ETS because voluntary commitments to reduce CO2 would not work. At that time, Sweden already had studies underway looking into setting up a baseline and credit system for light vehicles, with another planned for heavy-duty vehicles.
“These may fit in the time-gap prior to the possible introduction of transport in emission trading, or any new instrument,” he said.
The UK’s department for transport has some concerns about the scope of the EU ETS. It has released papers warning that bringing fuel producers into the scheme could, (indeed probably would), affect the cost of transporting goods, demand for road fuel and, as a result, fuel duty revenues, the department warned.
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By GlobalDataWhat, it asked, would be the impact of fully integrating road transport into the EU’s ETS as opposed to making it subject to a separate scheme with a link to EU ETS, which would limit the extent to which transport can buy allocations from other sectors? What, too, would be the feasibility and impact of setting an EU-level cap for road transport, compared to including road transport in national caps with member states determining the amount of allocations earmarked for road transport?
As jurisdictions with established emissions trading thrash out the practical difficulties of integrating transport in such systems, others are lagging well behind. Australia’s scheme was derailed in April this year after then Prime Minister Kevin Rudd delayed the planned start of a system that would have included transport, in a move that cost him his position. Now, the new Prime Minister, Julia Gillard, has promised to reinstate the planned emissions trading scheme but dates for the restored legislation are still being worked out.
By contrast, the New Zealand emissions trading scheme is up and running, and transport will enter the scheme on January 1, 2011. So far, it is concentrating on producers of fossil fuels, with the costs likely to add New Zealand dollars NZD0.07 per litre (US dollars USD0.04) to the cost of fuel at the pump.
Meanwhile, the US Senate has at last been debating its version of a long-promised emissions trading scheme, with a bill being published this May. So far, draft proposals suggest a minimum price of US dollars USD12 and a maximum price of USD25 per tonne of carbon in the first year of the scheme, beginning in 2013. It would rise between 3 and 5% above inflation every year following.
However, the plan came before the BP oil spill disaster and was also included expanding offshore oil drilling, gave incentives for expanding nuclear and renewable energy and returned two-thirds of the money the schemes generated to consumers to offset price rises. There may need to be some hasty re-jigging of sums.
Japan is aiming to have its emissions trading system in place in time for the Cancun meeting. Its bill ran out of time through Japanese parliamentary procedures in June, but was to be resubmitted following an upper house election expected on July 11.
The bill as it stands proposes an environment tax from 2011, boosting renewable energy sources to 10% by 2020 and cutting emissions by 80% by 2050.
Environment minister Sakihito Ozawa has expressed hopes that plans for a mandatory emissions trading system will stay on track with a compulsory carbon market in 2012 or 2013. Meanwhile, neighbouring South Korea announced on June 16 that it plans to establish a Global Green Growth Institute which would be a “fully fledged international organisation” by 2012. President Lee Myung-bak stressed at its launch at the East Asia Climate Forum South Korea would continue to expand its R&D budget for green technology and fine-tune tax and financial policy to create more green corporations and jobs.”
How is all of this filtering down to the automotive industry? The bigger groups have been greening their automotive manufacturing process by auditing energy use and emissions at their plants. But the key area has always been cleaning up the vehicles themselves. ACEA, the European carmakers association, is committed to reducing average carbon emissions to 120 grams of CO2 per kilometre by 2012, reflecting the EU’s official target. Both JAMA (the Japanese carmakers association) and KAMA (the Korean equivalent) are now committed to similar targets.
The UK’s Carbon Reduction Commitment credit trading scheme went live on April 1, and applies to any business that uses more than British Pounds GBP 500,000 of electricity each year. Charges will be enforced in 2011. The Society of Motor Manufacturers and Traders (SMMT) is working with the Retail Motor Industry Federation to make sure that dealerships are as aware as manufacturers of the new obligations. SMMT chief executive Paul Everitt said: “Although the scheme is initially complicated, it gives dealerships an incentive to reduce their energy use and effectively cut their costs. Vehicle manufacturers and franchised dealers will have to work closely over the next 12 months to improve their energy efficiency and this can only result in better working relationships within the industry.”
JULY MANAGEMENT BRIEFING: The low-CO2 challenge (Part 1)
