ArticlePDF Available

Public consultation for EU's own resources - Supranational hybrid materialism. Two strategies for own resource of the EU after 2020.

Authors:

Abstract

The continuous reduction restrictions to expanding the own resources of common budget of the EU and the trajectory of United Kingdom’s exit has reinstated the need for generation of own resources for the common EU budget. This policy paper puts forward two proposals based on hybrid finances and quasi-monetary markets based on taxing non-renewability, which altogether would create a form of supranational hybrid materialism that will be transformed into capital feeding into the common EU budget.
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
Supranational hybrid materialism:
Two strategies for own resources of the European Union after 2020.
Teodor Kalpakchiev, Head of Research, the-ENPI.org
Executive Summary
The continuous reduction restrictions to expanding the own resources of common budget of the
EU and the trajectory of United Kingdom’s exit has reinstated the need for generation of own
resources for the common EU budget. This policy paper puts forward two proposals based on
hybrid finances and quasi-monetary markets based on taxing non-renewability, which
altogether would create a form of supranational hybrid materialism that will be transformed
into capital feeding into the common EU budget.
I. Establishing a supranational hybrid finance system.
Countering large-scale tax evasion through externalization of EU’s competition
policy.
Transformation of all aid mechanisms to investment-related ones in order to
overcome the donor-recipient relationship, which is harming the reciprocity of
interregional relationships, which are ultimately the goal of European regional
governance.
Creation of a supranational oversight mechanism that ensures that capital control is
maximized and extrapolation of financial blending based on investing taxpayers’
money into infrastructure assets, while providing guarantees for the multiplication of
the venture through private capital.
Acquisition of state debt and collaterals from the American equity market through
national development banks and the creation of integrated national capital markets in
non-Eurozone countries.
Taxation of bitcoins and establishment of a technology adjustment fund to create
dedicated servers inside Europe, where operations will be both generated and
oversighted.
II. Creating quasi-monetary markets based on taxing non-renewability.
Usage of the clean development system to generate own resources for the adaptation
towards sustainable production and competitiveness (e.g. through emissions trading,
REDD+)
Integration of quasi-markets into EU’s own resources through the concept of carbon
leakage and the liability of foreign enterprises.
Creating a system of green trade, which is based on export promotion of environmental
goods and creation of monetary restrictions to goods non-compliant with EU’s internal
regulatory regime
Taxing waste (incl. its material and carbon externalities) inside the EU and non-
circular products entering the EU
All taxes on external borders to be channelled to EU’s common budget
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
Core Evidence-Based Proposals
I. Establishing a supranational hybrid finance system.
To begin with, the question does the European Commission have the authority to counter tax
evasion outside the external borders of the European Union remains unclear. The EU has
created a multiplicity of extended formal agreements with countries in the vicinity (e.g.
DCFTAs with Eastern Partnership Countries and advanced Association Agreements with
North-African Neighbourhood Policy countries), which are incorporated with modalities into
the common market and can potentially serve as destinations for tax evasion through the
creation of subsidiary companies. Especially in the case of DCFTA countries, due to the
establishment of shared horizontal governance networks, one can argue that there a degree of
sovereignty has been leased to the EU in vow of confidence and expectation for enhanced
conditionality pressure. This can be taken as a starting point for a claim of shared authority in
effectuating an effective institutional setup in the DCFTA countries, meaning that the European
Commission can target tax evasion and consequently share the profit with the target countries,
thus also alleviating partially alleviating the pressure for strengthening aid-related instruments,
such as the TAIEX and ENI.
Secondly, there is an overarching debate whether the European Commission should transform
development aid outside conflict and poverty-stricken regions into an investment
mechanism and facilitate south-to-south regionalism? The EU’s humanitarian leverage is
based on the being the largest donor of aid (counted with member states’ contributions) as well
as providing living space for refugees from conflicts. However, the disbursement of large sums
through other regional, sub-regional and non-state organizations created a relationship of
perpetuated dependency that feeds existing post-colonial discourses. These encompass both an
expectation for substitutive statehood in former colonies, as well as a discourse that aid is
actually meant to facilitate the expansion of European companies, thus an instrument that is
meant to enable economic colonialism.
Yet, in a globalized world of hybrid multilateralism and inter-regionalism, the EU must cater
for empowering existing structures by sharing the tools of the tradeof heading an innovative
regional governance machinery and catering for the economic empowerment of its counterparts.
Due to a process of peer-learning in local administrations, transforming more aid into
investments aimed at mobilizing private capital can accelerate the attainment of the SDGs and
cater for the financial self-sustainability not only of projects, but also of governance
machineries, which are dependent on mobilization of financial resources. More importantly, the
diffusion of actorness in aid delivery would ensure that expectations are redistributed and that
the donor-recipient relationship would be discontinued.
Although the principle of ownership governs the relationship between other regions and the
EU, they still remain dependent on its financial support and cannot truly innovate in, for
example, mutual learning on how to conduct regional integration in the global south. One of
the biggest successes of the EU is the support of interregional dialogues with Africa and Asia,
which remain platforms for approximation of the necessities for future deliverables. However,
there are barely any projects for south-to-south inter-regionalism, also due to the fact that
southern regional integration projects do not generate their own resources. Thus, revitalizing
the domestic economy through investments and the subsequent generation of taxes can also
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
have as a positive externality the improvement of multilateral ties between regional integration
projects in the global south. Bearing in mind that such a development would mean significant
loss of influence for EU, the post-colonial critique towards aid as a mechanism for perpetuating
post-colonial setups stands up. Also, although the EU will not be able to directly engage in
south-to-south dialogues, it might facilitate trilaterals on equal footing.
Still, the generation of resources through these operations will be largely possible through the
provision of guarantees for external investment operations, whereas the collateral will be
the common EU Budget (or potentially in the future, also EU bonds). As already is the case
with the EU’s External Investment Fund operational since the 5th AU-EU Summit in Abidjan,
Cote d’Ivoire, the EU is learning from the results of the EFSI and must replicate these examples
by programing external investment funds for South East Asia and South America. Thus,
while focusing on aligning corporate capital created largely through exploiting low labour costs,
the EU can also generate resources by providing guarantees for the stability and the success of
the investment. Naturally, capital oversight and succinct implementation are prerequisites for
these financial blending operations.
Thirdly, as it has become clear recently, the ownership of debt of one country by another can
change its relative negotiation power in international negotiations. This is especially evident
with the Chinese buyouts of US government debt, as well as partially of EU Member States
debt (e.g. Spanish). While these efforts improve the overall credit stability of a country,
essentially they are a way to strengthen the financial resilience of the purchasing country, as
even if spread out in time, the operations generate interest rate. Although the European Central
Bank cannot purchase debt on the primary markets, this is possible through intergovernmental
funds (such as the EFSF and the ESM), or through national development (in Eurozone) or
central banks (outside the Eurozone). The EU can clearly benefit from the Chinese example
and acquire debt from the American equity market, while focusing on the creation of integrated
national capital markets and bank oversight in non-Eurozone members, so as to facilitate their
reintegration into the Banking and Capital Market Unions.
Fourthly, although only ten member states have decided to participate in the proposed financial
transaction (Tobin) tax, it creates a precedent that can lead to tax evasion. Nevertheless, it is a
precedent in the usage of enhanced cooperation, as it deals with one of the two domains that
are exclusively in the hands of the member states. It can be used to formulate a new regulatory
mechanism for and a tax regime for cryptocurrencies, whose exponential price growth can
generate resources relatively fast. Although currently bitcoins and cryptocurrencies are an
alternative to bank deposits, rather than a mean for payment, with the development of digital
payments and ICT4Dev, they hold such a potential. Hence, a way to step up financial foresight
would be to generate a digital Tobin tax for cryptocurrencies, implemented by national
central banks.
As bitcoins themselves are oftentimes used to calculate algorithms for future investments, one
could use the generated capital to create state-owned servers, blockchain parks or mining
capacities, which would make sure that the decentralized computing is happening on EU ground
and subject to EU rules. As each algorithm is meant to become more and more complicated,
quick reactions are necessary. Later, the computing power of these computer centres can be
used to advance a supranational leasing society that can render services to companies (e.g.
large scale rasterization of city eco-adaptation projects or exterior and interior of large-scale
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
passive buildings). The two main prerequisites for this would be the integration and the
protection of national digital signature databases, as well as the creation of anti-hacking and
pen-testing capacities working, for example for an EU Cyber Security Agency.
II. Creating quasi-monetary markets based on taxing non-renewability
The main guiding question for this proposal is whether the EU can the support for the
emergence of ETS and REDD+ systems transform carbon leakage into a revenue generating
system, which is elaborated further below.
The European Emissions trading system is the natural continuation of the efforts for achieving
environmental justice inside the European Union (resp. also compliance with the Aarhus
Convention through Directive 2003/35/EC), as well as the Kyoto Protocol and the Clean
Development System. In contrast with other Emissions Trading Schemes, such as those in
China, South Korea, Canada, Japan, New Zealand, Switzerland, and the United States, the EU
ETS is possibly the most advanced system, as it allows exchanges not only among states, but
also among the polluters themselves. It targets emissions from large-scale energy and resource
installations and is currently going through a process of reform due to the accumulated problems
such as low prices and excessive allowances that were partly result of the lower economic input
during the financial crisis. Its latest, fourth edition, aims to offset these imbalances through
1) Еxpanding the range of large-scale enterprises, extractive industries, energy
installations, etc. that are targeted with logistics, shipping, transportation, land use
change, etc. For more information, see the Legislative Train Schedule, Resilient Energy
Union with a Climate Change Policy
1
;
2) Increasing the targets for annual emission reductions and the overall targets to be
achieved by the end of 2030. In order to compensate the effects of extra allowances that
were generated due to the low economic output during the crisis the newest ETS
includes a market reserve that is used as buffer to external shocks.
3) Improving the mainstreaming of environmental targets in all policies of the European
Union, incl. Transport, Energy, Industry, Regional Development and Cohesion,
Education, Research and Innovation.
Thus, EU’s Emissions Trading System is one of the most advanced economic policy
experimentations in EU’s normative order. Essentially a financial rebalancing mechanism,
aimed at instigating environmentalism into European electrical and industrial production
facilities, the EU ETS has lived through a number of programmatic adjustments, incl. expanding
the market efficiency through limiting the free allocation of allowances and creating a form of
carbon debt storage through the market stability reserve, improving national oversight over
collection, increasing the targets for emission reduction and proposing to expand the tax base
by including aerial and land transportation into the scheme. Personal information to be
processed according to standards on what and how information is used, the same as cookies.
While the EU’s Emissions Trading System is one of the most developed in the world, there are
a number of other local and regional systems, such as that of California state in US or Quebec’s
in Canada, which follow a similar trend to that of EU in terms of reducing permissible quotas,
1
Legislative Train, Resilient Energy Union With A Climate Change Policy, Revision Of The Eu Emission Trading
System For The 2021-2030 Period, http://www.europarl.europa.eu/legislative-train/theme-resilient-energy-
union-with-a-climate-change-policy/file-revision-of-the-eu-ets-2021-2030
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
the regional ETS in China, which is on the arduous path of supralocal integration, as well as
Kazakhstan’s four yearlong commitment towards ecological sustainability that has been well
paired with knowledge sharing congresses such as Astana Expo in 2017. EU’s internal issues
related to the ETS connectivity are mostly related to the large selling of allowances by UK,
following its exit, the integration with Swiss ETS, as well as the expansion of EU’s ETS
mechanism towards the EU Neighbourhood countries.
Without claims for exhaustiveness, this short paragraph only wants to reiterate the need for
interregional connectedness of Emissions’ Trading Systems in the Global North, their
replication in the Global South. This necessity comes, however, with a degree of caution
necessary for the effect of carbon leakage“, which is instituted due to the higher wage
productivity achieved if enterprises are moved towards less developed countries. This process
not only impedes the competitiveness of the country or regional organization that has adopted
the Emissions Trading System, but also moves emissions to potentially unaccounted
destinations.
There are at least two prerequisites for process of integration of the various national and regional
emissions trading systems the standardization of the currency (the volume of emissions it
includes), as well as the price convergence that will be achieved through pegging the different
ETSs. Within such an integrated ETS, carbon leakage to countries without an ETS must be
prohibited and payments for generated emissions shared between the country of origin and the
new hosting country. Also, if companies are MNCs, their local branches should not be rewarded
with additional allowances if they decide to move the emission-intensive production outside
the ETS. An offset mechanism could be created through the usage of the REDD+ system,
whereby the company that induces carbon leakage is obliged to reinvest part of its profits in
reforestation of both the original and the target destinations.
EU’s support for the emergence of ETS and REDD+ systems happens predominantly through
financial support of the World Bank and UN initiatives as implementing organs.
For a map of existing ETS around the world, please refer to Annex I.
For a summary of the existing ETS legislation in EU, please refer to Annex II.
For an overview of the ETS policy failure and academic debate on its reform, please
refer to Annex III.
For an overview of the next phase of ETS and the positions of EP party fractions, please
refer to Annex IV.
A second guiding question to this proposal is whether the EU can establish a supranational
green adaptation fund based on taxing waste (incl. its burning, storage), as well as non-
circular goods entering the EU?
Waste taxation currently lies in the hands of local authorities, which set the levels according to
their own preferences. Waste taxation is one of the main ways to channel additional resources
for co-funding of low-carbon eco-adaptation projects, supported by the European Union and
creates a regime of competition among local authorities. Naturally, elements of circularity such
as sourcing biowaste and using it for fertilizers or biofuels or supporting decentralized
renewability of energy and other resources are solutions that multiply the effects on the local
level. Parts of these waste-based levied taxes, however, could be channelled to the EU, as they
are essentially targeting if not global, then at least the protection of regional public goods.
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
However, as EU’s trade mechanism is an exclusive and supranational competence and as
regulatory approximation with the rest of the world is a mean to facilitate the reduction of non-
monetary barriers, the taxation of non-renewable, non-circular, non-repairable and non-up-
scalable goods, as well as foodstuffs that do not comply with phytosanitary or ingredients
related goods could be an addition to the trade facilitation of Environmental goods that is
currently part of EU’s external environment and trade policy nexus. These can be then
channelled to a green adaptation fund meant to create green jobs through facilitating the
decentralized and quota-enabled geographic dispersal of production of eco-innovative goods.
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
Annex I. Map of Emissions Trading Systems
2
2
International Carbon Action Partnership (ICAP) Status Report 2016, Emissions Trading Worldwide,
https://icapcarbonaction.com/images/StatusReport2016/ICAP_Status_Report_2016_Online.pdf, p. 22-23
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
Annex II. Summary of the most recent version of the EU ETS directive
1. References to important documents
a. The Kyoto Protocol
b. The Aarhus Convention, resp. UNECE Convention on Access to
Information, Public Participation in Decision-Making and Access to Justice
in Environmental Matters of 1998
c. The 7th Environmental Action Programme of the EU
d. United Nations Environment Programme
e. The Gothenburg Protocol
f. European Monitoring and Evaluation Programme (EMEP) under the
Protocol to the LRTAP Convention
2. Cross fertilization of the environmental pollution agenda with other issues
a. Health
b. Responsible extractive industries
c. Quality of food, water and air
d. Environmental quality
e. Waste reduction
f. Renewable energy
g. Biodiversity and ecosystems
h. Human welfare
3. Obligations of the member states
a. for compliance with the targets set out
b. for creation of national platforms for programming, monitoring and
assessment
c. for reporting the achieved results annually
d. to focus on urban and rural agglomerates with increased economic activity
e. To ensure the active and systematic dissemination to the public of the
following information by publishing it on a publicly accessible website
(Directive 2003/4/EC)
f. To lay down the rules on penalties applicable to infringements of national
provisions (Art. 17)
g. to draw, adopt and implement national air pollution control programmes
(Art. 1)
i. Member States may follow a non-linear reduction trajectory if this is
economically or technically more efficient, and provided that as from
2025 it converges progressively on the linear reduction trajectory
(Art. 4)
ii. As from 2025 the following additional conditions shall apply to
adjustments in case of there being significantly different emission
factors or methodologies used for determining emissions from
specific source categories (Art. 5)
iii. Seasonal alterations hindering the plans should be compensated
within the same year (Art. 5)
iv. Overt stringency of aspired targets during a specific year may be
reduced to the cost-effective solution (Art. 5)
v. Must demonstrate all reasonable efforts, including the
implementation of new measures and policies in periods of non-
compliance (Art. 5)
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
h. update emission reduction policies and measures contained in the national
air pollution control programmes shall be updated within 18 months of the
submission of the latest national emission inventory or national emission
projections and their national air pollution control programmes at least every
four years (Art. 6)
i. to enhance legal certainty, clarity, transparency and legislative simplification
j. consult the public (Directive 2003/35/EC)
k. to ensure the monitoring of negative impacts of air pollution upon
ecosystems based on a network of monitoring sites that is representative of
their freshwater, natural and semi-natural habitats and forest ecosystem
types (Art. 9)
l. to provide the Commission with their first national air pollution control
programmes, national emission inventories and projections, spatially
disaggregated national emission inventories, large point source inventories
and the informative inventory reports to the Commission by 1 April (Art. 10)
m. to provide the European Environmental Agency with the location of the
monitoring sites and the associated indicators used for monitoring air
pollution impacts (Art. 10)
4. Role of EU Institutions
a. The Commission, assisted by the European Environment Agency review and
assess use of mechanisms for flexibility (Art. 5)
b. The Commission endeavours access to funds, resp. the Framework
Programme for Research and Innovation; the European Structural and
Investment Funds, including relevant funding under the common
agricultural policy; instruments for the funding of environment and climate
action such as the LIFE programme to support the development and
implementation of environmental measures (Art. 7)
c. The Commission, assisted by the EEA reviews the national emission
inventory data in the first year of reporting and regularly thereafter (Art. 10)
d. The Commission reports the progress towards the indicative emission levels
and emission reduction commitments, air quality levels, biodiversity and
ecosystem objectives, identify further measures and evaluate health,
environmental and socioeconomic impacts of the Directive (Art. 11)
e. To set up a European Clean Air Forum to provide input for guidance and
facilitate the coordinated implementation of Union legislation and policies
related to improving air quality, bringing together all stakeholders including
competent authorities of the Member States at all relevant levels, the
Commission, industry, civil society, and the scientific community at regular
intervals. The European Clean Air Forum shall exchange experience and
good practices, including on emission reductions from domestic heating and
road transport, that can inform and enhance the national air pollution control
programmes and their implementation. (Art. 12)
5. Scope (Art. 2)
a. anthropogenic atmospheric emissions of sulphur dioxide (SO2), nitrogen
oxides (NOx), non-methane volatile organic compounds (NMVOC),
ammonia (NH3) and fine particulate matter (PM2,5)
b. all sectors and policies- transport (land, air, maritime), energy (from fossil
fuels), agriculture, forestry, construction sector and services
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
Annex III. Policy Failure and Options for Reform
There is wide debate that the EU ETS suffers from declining effectiveness due to the large
fluctuations and dropdowns in the prices of the allowances and the generated excesses.
Naturally, the debate around which sectors of the economy should be included involves
proposals such as land use (for agriculture, cattle, energy, minerals extraction, etc.), the
transport sector, as well as small-scale industries, as well as the measurement and monitoring
of emissions, how to incorporate low-carbon adaptation models, as well as communicate these
to the wider audience. The ETS is also inextricably linked with the development of financial
services, as well as other types of quasi markets, such as those of cryptocurrencies, which can
provide answers to whether solutions are viable.
The main policy failure of the EU ETS came as a consequence of the economic downturn during
the global financial crisis, which resulted in an oversupply of emission certificates and their
depreciation. This failure has shifted the policy debate towards extending Keynesian
expenditures towards adaptation and energy efficiency instead of focusing on creating markets.
The EU ETS as also failed to spur investments and enriched private interests at public expense,
including encouraging fraud
3
. Additionally, the pricing of environmental externalities,
occurring as a results of ineffective social coordination or usage of terminology, may alter
incentives of companies and consumers and reduce the competitiveness of a given industry, as
in a global carbon market there will always be free riders.
Options for reform of the EU ETS are often divided into market and state driven, centralized or
fragmented or leaning towards the establishment of a global emissions trading system. The
debate is often dominated by neoliberal approaches, resp. creating a market for emissions’
certificates, which had received critiques for commodifying the atmosphere
4
. But on the other
end of the political spectrum, neo-Marxists are also critical toward measuring the value of
nature in financial terms and instead blame the inadequate response by the state
5
. This also
poses the question of the integration of the domestic (resp. intra-EU) market of emissions with
the gradually emerging global ETS market
6
. For example, China is currently preparing an
alpha-version of its own carbon market, which if materialized, will be much bigger than EU’s
own. On the other hand, the environmental justice framework for analysis focuses much more
on results than on the effectiveness of contractual relations and sees the expropriation of
3
Aled Dilwyn Fisher (2014) Human Rights in the Transition to a “Green Economy” Critical Human Rights-Based
Approaches to Climate Change in Norway, Nordic Journal of Human Rights, 32:3, 258-279, DOI:
10.1080/18918131.2014.937211
4
Benjamin Stephan & Matthew Paterson (2012) The politics of carbon markets: an introduction, Environmental
Politics, 21:4, 545-562, DOI:10.1080/09644016.2012.688353, p.549
5
Malcolm Fairbrother (2016) Externalities: why environmental sociology should bring them in, Environmental
Sociology, 2:4, 375-384, DOI: 10.1080/23251042.2016.1196636, p.379
6
South Korea, Japan, New Zealand and New South Wales have already their own trading schemes and the WB
has assigned grants to Chile, China, Columbia, Costa Rica, Indonesia, Mexico, Thailand, and Turkey. Benjamin
Stephan & Matthew Paterson (2012) The politics of carbon markets: an introduction, Environmental Politics,
21:4, 545-562, DOI:10.1080/09644016.2012.688353
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
resources (by the global North) stemming from the global South as a form of discrimination
7
.
This perspective brings us to another important factor, namely the effort and benefit sharing,
resulting from investment of capital generated in highly competitive (and oil-extracting)
economies.
There are options for usage of voluntary market instruments or the segmentation of the ETS
into separate markets, which inhibits possible continuity and simplicity. Such an example is the
REDD+, an exemplification of the Clean Development Mechanism that combats deforestation
by payments for a state-driven sustainable management of forest resources through usage of
biannual moratorium on licences for primary forests usage, strengthened with satellite
surveillance and participatory feedback and creation of a licences database
8
. The Norwegian
experience shows that setting up a climate fund, funded via investment returns and sales of
“electrical certificates”
9
results in an increase of electricity prices.
7
Aled Dilwyn Fisher (2014) Human Rights in the Transition to a “Green Economy” Critical Human Rights-Based
Approaches to Climate Change in Norway, Nordic Journal of Human Rights, 32:3, 258-279, DOI:
10.1080/18918131.2014.937211
8
Rini Astuti & Andrew McGregor (2015) Responding to the green economy: how REDD+ and the One Map
Initiative are transforming forest governance in Indonesia, Third World Quarterly, 36:12, 2273-2293, DOI:
10.1080/01436597.2015.1082422, p.2278-2288
9
Aled Dilwyn Fisher (2014) Human Rights in the Transition to a “Green Economy” Critical Human Rights-Based
Approaches to Climate Change in Norway, Nordic Journal of Human Rights, 32:3, 258-279, DOI:
10.1080/18918131.2014.937211
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
Annex IV. Forthcoming policy developments and positions of party factions in the EP
The EU ETS is a “cap and trade” system, meaning that it sets an increasingly conservative
threshold for emissions, which are traded as a form of quasi-currency. Thus, in accordance with
the Kyoto commitments, it establishes an increasingly restrictive and wide-reaching “clean
development mechanism” that covers electricity production and large manufacturing industries.
For the 2020-2030 period, the agreed levels for reduction reach as far as 40% - much higher
than what the current baseline scenario will achieve. The programming of will incorporate the
following elements
10
:
Yearly linear reduction rate of 2.2%
Allocation of 52% of the allowances and auctioning the rest 48%
Distribution of 10% of allowances to countries with lowest per capita GDP growth
Sectors highly exposed to carbon leakage (e.g. those having to leave the Common
Market, since their energy and emissions intensity appreciates the production process
vehemently) will receive free allowances corresponding to the volume of their
emissions
The revenues from 450 million allowances will be earmarked in an innovation fund for
low-carbon innovative technologies
Two percent of the revenues from the allowances will be transformed into a
modernization fund, which will support the transition to an energy system powered by
renewables, as well as the low-carbon transition in member states with GDP below 60%
of EU’s average
Two percent of the auctioning revenues will be used to create a just transition fund that
will offset the labour force that has fallen out of the market due to closure of
unsustainable production capacities
The surplus of allowances generated during the low economic output that followed the
financial crisis will continue to be stored in a market stability reserve, which will be
gradually back-loaded into the general scheme
The width of the ETS’s foundations will gradually incorporate emissions from the
logistics and maritime transportation, as well as Land-Use, Land-Use Change and
Forestry (LULUCF)
Position of European People’s Party
11
The EPP sees the EU ETS as a vital pillar of EU’s climate policy and a way towards an industrial
renaissance that awards best performers with protection. They approve of the 40% target for
2030, are concerned about potential job losses, want to ensure that the best performers (10%)
among the industries faced with carbon leakage are rewarded will full remission, want to
stimulate Research and Development, simplify the regime towards SMEs and recognize the
particularities of Eastern Europe’s situation. Concrete propositions are:
to retain the linear reduction factor of 2.2%
increase allocation rates (from the proposed 43%)
to use the revenues from auctioning for the innovation fund
to allow unspent allowances in the 3rd period to be used in the 4th
10
Legislative Train Schedule, Resilient Energy Union With A Climate Change Policy, Revision Of The Eu Emission
Trading Scheme Directive For The 2021-2030 Period, http://www.europarl.europa.eu/legislative-train/theme-
resilient-energy-union-with-a-climate-change-policy/file-revision-of-the-eu-ets-2021-2030
11
EPP Group priorities for ETS reform, http://www.eppgroup.eu/news/EPP-Group-priorities-for-ETS-reform
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
to acknowledge that sectors not included in the EU ETS, such as sustainable
transportation and construction can contribute with further reductions and create jobs
to harshen the stance towards intra-EU flights
take into account geographical considerations, use qualitative assessments, lower
allocations for sectors not at risk of carbon leakage and adopt supercredits (in the range
of 5%) for best-performers
fine tune allocation of ETS with production rates and use benchmarks that include recent
technological attainments more frequently
allow for the possibility x% of auctioning share to be pooled at EU level and allocated
to cover a relevant proportion of indirect costs;
modernization fund to ensure district heating modernization
revenues from innovation fund to be used to finance R&D, abatement opportunities and
other measures to reduce GHG emissions and contribute to international climate policy
objective
Position of Socialists and Democrats
The S&D’s statements include a balanced approach between climate change and the european
industry's competitiveness
12
and holds a tighter stance than EPP, which is blamed in pampering
certain industrial sectors. The Shadow Rapporteur from the fraction wants the cancellations of
surplus allowances on the market, a just transition fund to protect workers during the transition
to a low-carbon society, lowering shipping emissions in the future and no financing for new
coal plants
13
. Jytte Guteland also wants a coherent approach to all industries, respecting the
COP21 ambitions and ensuring predictability, while Edouard Martin wants equally high
ambition on all three fronts: climate, industry and society
14
. According to
progressives4climate
15
a reformed ETS should address carbon leakage, help energy intensive
industries to shift to a low carbon production model and directly promote research and
innovation in low-carbon tech. They believe a more stable and efficient ETS will serve as an
example to other regions and call for the introduction of a European system of carbon taxation
that sets a price of carbon of more than to 50 Euro per ton by 2020 and 1000 euro per ton by
2030, as well as the usage of standards, rules and regulations, adaption of public policies,
investments and incentives.
ECR
Ian Duncan from ECR is the lead negotiator from the EU ETS, who wants to strike balance
between protecting jobs and meeting climate objectives. He notices that carbon leakage is
invisible and can turn to investment leakage and that member states fail to see beyond their
borders
16
. Hans-Olaf Henkel, a shadow rapporteur proposes separate tracks for energy and
12
Martin De La Torre, Victoria, The Emissions Trading System must be tuned into the EU’s climate commitments,
say S&Ds, 15.12.2016, http://www.socialistsanddemocrats.eu/newsroom/emissions-trading-system-must-be-
tuned-eu-s-climate-commitments-say-sds
13
Pelz, Silvia, Set-back in the fight against climate change as EPP crushes ambitious reform of Emission Trading
System, 15.02.2017, http://www.socialistsanddemocrats.eu/newsroom/set-back-fight-against-climate-change-
epp-crushes-ambitious-reform-emission-trading-system
14
Jytte Guteland on the Emissions Trading System (ETS), 15.02.2017
http://www.socialistsanddemocrats.eu/channel/jytte-guteland-emissions-trading-system-ets
15
Progressives for Climate, http://www.socialistsanddemocrats.eu/progressives4climate
16
Ian Duncan: Free allowances to be 'beating heart' of EU ETS reform, 31.05.2016,
https://www.theparliamentmagazine.eu/articles/interview/ian-duncan-free-allowances-be-beating-heart-eu-
ets-reform
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
industry instead of one-size fits all approach
17
and wants the EU to strive to ultimately link its
carbon market with others. Some other MEPs are employing a reductionist approach that is
dressed as realism and pragmatism
18
.
ALDE
stronger Innovation Fund with scaled-up means to leverage private investments in
breakthrough industrial technologies
continuation of the free allocation of allowances to the 10% of best performers as an
exemption to the general rule, in order to prevent carbon leakage
19
Including the shipping sector
20
, which will lead to increased level of transparency,
promote the adoption of new technologies to improve efficiency, incl. operational fuel
consumption efficiency
Assesses MEPs the cancellation of up to 1 billion emission allowances and raised the
yearly emission reductions of the system from 2.2% as a moderate achievement
21
GUE/NGL
Criticizes the ‘trade and cap’, due to its supply and demand incentive and dependency
on market value of allowances
Proposes instead continuous subsidies for renewable energy
22
Supports the abolishment of payments to fossil fuel and energy intensive industries,
which should instead be given for energy efficiency and renewables
23
Is concerned about the potential energy poverty effects as result of rising electricity
prices
24
Wants the cement industry to remain in the carbon leakage list, thinks that inclusion of
shipping in the ETS might result to losses of competitiveness and welcomes the
adoption of an 800-million reduction in the number of carbon credits and an increase in
their price as well as less reliance on the ETS
25
Greens
17
Hans-Olaf Henkel, EU ETS reforms must balance restriction and protection, 01.06.16,
https://www.theparliamentmagazine.eu/articles/opinion/eu-ets-reforms-must-balance-restriction-and-
protection
18
Esther de Lange, EU ETS reform should be simple and realistic, 30.05.16,
https://www.theparliamentmagazine.eu/articles/opinion/eu-ets-reform-should-be-simple-and-realistic
19
Fredrick Federley, EU Emissions Trading Scheme: Parliament’s Industry Committee adopts ambitious reforms,
13.10.2016, http://alde.eu/en/news/729-eu-emissions-trading-scheme-parliament-s-industry-committee-
adopts-ambitious-reforms/
20
ALDE, MEPs back new climate measures for maritime sector, 28.04.2015, http://alde.eu/en/news/47-meps-
back-new-climate-measures-for-maritime-sector/
21
ALDE, European Parliament Environment Committee backs moderate improvements in EU carbon market,
15.12.2016, http://alde.eu/en/news/793-european-parliament-environment-committee-backs-moderate-
improvements-in-eu-carbon-market/
22
GUE/NGL, EU’s Energy Union policy on gas and ETS biased towards big companies, 20.09.2016,
http://www.guengl.eu/news/article/eus-energy-union-policy-on-gas-and-ets-biased-towards-big-companies
23
GUE/NGL, COP22: EU must respect indigenous rights and abolish subsidies to the fossil fuel industry,
05.10.2016, http://www.guengl.eu/news/article/cop22-eu-must-respect-indigenous-rights-and-abolish-
subsidies-to-the-fossil
24
GUE/NGL, Commission’s ‘winter package’ may worsen energy poverty, 13.12.2016,
http://www.guengl.eu/news/article/commissions-winter-package-may-worsen-energy-poverty
25
GUE/NGL, Market-based instruments not the solution for climate change, 13.02.2017,
http://www.guengl.eu/news/article/market-based-instruments-not-the-solution-for-climate-change
the-ENPI.org // The European Network of Policy Incubators
Project: Sustainability
Policy Paper §4: Supranational hybrid materialism
The Greens are naturally critical to most of the proposals, supportive of the attainments of
COP21, as well as the codification of the EU ETS that was achieved within the Environmental
Committee of the EP
26
. They want to accelerate the removal of free allocations to the aviation
industry
27
, as they should face the same reductions as other sectors.
Sample quote 1: “Regrettably, the compromise also includes a number of early Christmas
presents for many of the EU’s biggest polluters. A new 10 billion subsidy scheme for the most
power intensive industries will be carved out from the common EU pot, seriously diluting
incentives for the sector to green their power sources. The steel and fertilizer sectors will be
given allowances even more generous than under the current rules and the Polish government
will be able to continue to support their coal fired power sector. However, we are pleased to
have secured much needed restrictions for cement and clinker manufacturers.”
28
Sample quote 2: “EU governments would be allowed to avoid permanent greenhouse gas
reductions through creative accounting of how greenhouse gases are stored by forests or the
soil. Scandalously, EU member states could also use surplus allowances from the EU’s
emissions trading scheme (ETS) to offset emissions reductions in sectors outside the ETS,
instead of actually reducing their emissions.”
29
26
Greens/EFA, Keep the spirit of the Paris agreement alive!, 09.02.17, https://www.greens-
efa.eu/en/article/news/keep-the-spirit-of-the-paris-agreement-alive/
27
Greens/EFA, EU Commission lets aviation off the hook again, 03.02.17, https://www.greens-
efa.eu/en/article/press/eu-commission-lets-aviation-off-the-hook-again/
28
https://www.greens-efa.eu/en/article/press/ets/
29
https://www.greens-efa.eu/en/article/press/eu-climate-change-policy/
ResearchGate has not been able to resolve any citations for this publication.
Article
Full-text available
This paper analyses the technologies of government that proponents of the Reducing Emissions from Deforestation and forest Degradation (REDD+) mechanism are adopting to influence forest governance in Indonesia. It analyses the aspects of forest governance being problematised; the solutions being constructed; and who is influencing the production and content of these solutions. The research focuses on three aspects of the One Map Initiative: the forest moratorium; forest licensing; and new standards in participative mapping. Our findings show that the initiative has created new opportunities and constraints for forest reform. New disciplinary and participatory technologies have emerged that have created political spaces for activists to actively promote social and environmental justice concerns. However, our analysis also shows tensions for forest stakeholders between engaging in the new opportunities of the green economy and the risk of having political issues rendered technical.
Article
Full-text available
This overview of the existing political analysis of carbon markets identifies three broad strands in the literature. The first is concerned with the processes by which particular carbon market schemes are established. The second focuses on the role of particular actors in the creation of carbon markets. The third strand assesses carbon markets on efficiency, legitimacy or justice grounds. This existing literature is contrasted with the framework developed by the contributions to this volume. Broadly drawing on constructivist and poststructuralist approaches, the carbon economy is deconstructed, its history scrutinised and the practices and technologies that have been used to bring these markets into being are highlighted. Thus it is demonstrated that politics is not limited to the policy process leading up to the decision to implement an emissions trading scheme or offset mechanism, but is also present in the forms of knowledge claims that underpin these markets, as well as the various daily practices that constitute them.
Article
The concept of externalities represents the core of environmental economics but appears much less in sociology and other social sciences. This article presents the concept of externalities and makes a case for its usefulness, noting reasons why environmental sociologists should like it and use it more than they do currently. The concept is closely tied to theories – of why environmental problems occur and how they can be addressed – which contradict influential perspectives in environmental sociology. But an externalities-centred approach to environmental issues is nonetheless highly sociological and consistent with current research in other subfields. From an externalities perspective, environmental problems and protection are intrinsically social, and often highly political, rooted in relations of injustice and/or distrust. Practically, the most promising solutions to environmental problems embody a balance of market liberalism and strong state regulation. Externalities should therefore be a constructively unifying concept for environmental research across the social sciences. The concept is also provocative; however, in that its diagnosis of environmental problems amounts to powerful advocacy for major policy changes – even if within capitalism and given continued economic growth.
Article
Norwegian climate policy has stalled; it is fundamentally isolated from broader energy and economic policies, particularly the country's petroleum industry. Human rights can reinvigorate climate politics by recognising direct threats to global rights from climate change, and indirect threats from existing climate policy to workers and communities dependent on carbon-intensive development and jobs. A critical, structure-orientated human rights approach can overcome “problem solving”, legalistic approaches and hegemonic “green economy” narratives, offering an analytical framework that highlights the (largely North–South) “climate justice” claims behind the climate crisis, and a basis for action for social movements to demand rapid transitions that address these justice issues while securing human rights. This article develops a framework for Norway's human rights obligations based on recognition of the right to equal ecological space for the fulfillment of all human rights (and consequent “ecological debt”) and the insights of institutional human rights theories, before outlining a human rights-based approach, based on human rights-based approaches to development (HRBAs) and illustrated through the right to work, that fulfils these duties. After analysing Norwegian climate discourses in light of this framework, the article tentatively outlines how this approach can provide a basis for action for social movements in Norway.
The Emissions Trading System must be tuned into the EU's climate commitments, say S&Ds
  • Martin De
  • La Torre
Martin De La Torre, Victoria, The Emissions Trading System must be tuned into the EU's climate commitments, say S&Ds, 15.12.2016, http://www.socialistsanddemocrats.eu/newsroom/emissions-trading-system-must-betuned-eu-s-climate-commitments-say-sds
Set-back in the fight against climate change as EPP crushes ambitious reform of Emission Trading System
  • Silvia Pelz
Pelz, Silvia, Set-back in the fight against climate change as EPP crushes ambitious reform of Emission Trading System, 15.02.2017, http://www.socialistsanddemocrats.eu/newsroom/set-back-fight-against-climate-changeepp-crushes-ambitious-reform-emission-trading-system 14 Jytte Guteland on the Emissions Trading System (ETS), 15.02.2017
EU Emissions Trading Scheme: Parliament's Industry Committee adopts ambitious reforms
  • Fredrick Federley
Fredrick Federley, EU Emissions Trading Scheme: Parliament's Industry Committee adopts ambitious reforms, 13.10.2016, http://alde.eu/en/news/729-eu-emissions-trading-scheme-parliament-s-industry-committeeadopts-ambitious-reforms/
New Zealand and New South Wales have already their own trading schemes and the WB has assigned grants to Chile
  • South Korea
South Korea, Japan, New Zealand and New South Wales have already their own trading schemes and the WB has assigned grants to Chile, China, Columbia, Costa Rica, Indonesia, Mexico, Thailand, and Turkey. Benjamin Stephan & Matthew Paterson (2012) The politics of carbon markets: an introduction, Environmental Politics, 21:4, 545-562, DOI:10.1080/09644016.2012.688353 10.1080/18918131.2014.937211
EU ETS reform should be simple and realistic
  • Esther De Lange
Esther de Lange, EU ETS reform should be simple and realistic, 30.05.16, https://www.theparliamentmagazine.eu/articles/opinion/eu-ets-reform-should-be-simple-and-realistic
MEPs back new climate measures for maritime sector
  • Alde
ALDE, MEPs back new climate measures for maritime sector, 28.04.2015, http://alde.eu/en/news/47-mepsback-new-climate-measures-for-maritime-sector/