The Huge Price of failing Kyoto’s commitments. The case of Spain

  • 6 November, 2013

Many people think that the fact of signing and ratifying multilateral protocols regarding Climate is a mere declaration of interest with no further obligations. Some other think that it is just a formal occasion that serve world leaders for the glory of those appearing in the “family portraits” of every summit. However, this is very far from reality. These agreements are binding commitments with strong ramifications in many different areas and in economic matters particularly.

The case of Spain is a clear example. Recently, the European Environment Agency (EEA) has published the degree of compliance of the EU members with respect to their commitments to reduce greenhouse gases (Kyoto Protocol and subsequent agreements).

Spain is located in the tail group of the European Union with countries like Austria, Liechtenstein and Luxembourg. And that is an  expensive place to be, very expensive .

Unable to achieve their objectives through a stable policies to foster energy efficiency and renewable energies , Spain has had to hit the market repeatedly since 2008 to acquire CO2 emission rights . And that has a high price. Specifically 800 million Euros since 2008.

And that having a lot of luck given that Spain was greatly benefited (by chance) by the fact that the impact of the crisis on industrial activity moderated the growth of the gap and led to a drastic drop in the price of carbon rights. On one hand, the depressed industrial production contracted emissions of greenhouse gases, thus preventing the gap between what Spain should issue and its actual emissions from rising up. On the other hand the industrial production slowdown depressed the price of emission rights leading member states and their companies to a sudden excess of allowances that could be taken to market (not few companies have survived the crisis by trading this excess of allowances, by the way) .

In a nutshelle, by chance, it was cheap for Spain to go and find in the market the carbon rights to compensate for its lack of commitment with Kyoto, but it could have been a complete disaster with a cost of billions Euros. Just one piece of information, from 2008 to 2012 the price of carbon credits in the market collapsed from operations valued at 5 € per tonne to less than 1 € . In fact, the Spanish Office of Climate Change announced last year the acquisition of number of allowances equal to a hundred million tons to Poland at a price close to 1 €.

An clear example of improvisation and lack of strategy in a vital sector such is the energy sector.

By the way, what’s the reason why the utilities lobby does not talk about this? Ironic, right?

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