To deal with climate change we need sustainable energy systems, but foreign energy suppliers are currently pushing Dutch suppliers out of the market. ‘EU policy needs to be better coordinated.’
With these words, Dr Laurens de Vries, senior lecturer in the Energy & Industry Section of the Faculty of Technology, Policy and Management, takes a look ahead to the Climate Summit in Paris. How can coordination be improved? This is exactly what his research group is studying. ‘We are focusing mainly on the effects of carbon and sustainable energy policies on investments in the energy sector.’
His conclusion: countries in the European Union sometimes work at cross purposes when it comes to sustainable energy policy. ‘This is because countries each have their own sustainability targets. For example, Germany is much further ahead than the Netherlands in this area. Electricity prices are low, because more than a quarter of the energy is generated sustainably. The result is that the Netherlands is importing more and more energy from Germany. Not only does this not help us achieve our sustainability targets, but it is also pushing traditional Dutch companies out of the market.’
EU policy has a key role to play in this, says de Vries. ‘It is poorly coordinated.’ The carbon market, and the emissions trading system in particular, is the EU’s most important policy instrument. Its aim is cost-effective reduction of greenhouse gas emissions through the trade of emission allowances: the right to emit a certain amount of greenhouse gases. Users and providers trade in emissions allowances, which results in a carbon price. ‘However, lobbying, a drop in demand due to the economic crisis and more investment in sustainable energy than expected mean there are too many emissions allowances around,’ says de Vries. The result is that large companies no longer feel the pressure to limit their emissions. Of course, each company needs to surrender as many emissions allowances as it has emitted in tonnes of greenhouse gases, but this has absolutely no impact if it has enough allowances.
However, the researcher believes there is also good news: ‘The European
Parliament has accepted a proposal for a stability reserve for carbon allowances: if there is a surplus on the market, some will be placed in the reserve, and if the market is tight allowances are released from the reserve. The idea is to stabilise the carbon market, but our model showed that the original version failed to work as intended. After we presented our research to the European Commission, the time between acknowledging that there are too many allowances and actually removing them from the market was reduced from two years to one year. This lessens the risk of the reserve itself contributing to price bubbles in the carbon market. Of course, I don’t know whether this was a direct result of our research.’