EU Commission Postpones Plan to Impose CO2 Tolls on EU Commercial Road Traffic, As European Businesses Grieve Over Loss of 'Liberty to Travel'

http://www.euractiv.com/en/transport/eu-green-transport-plans-ignore-co2/article-173964

EU 'green transport' plans to ignore CO2

7 July 2008

Despite the bloc's ambitious goal to slash greenhouse gas emissions by 20% by 2020, Commission proposals due to be unveiled tomorrow (8 July) would effectively prohibit governments from including the cost of CO2 emitted by road transport in their toll tariffs.

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Background:

The EU's first attempt at addressing the wide range of negative 'external effects' produced by transport was in 1993, when it put forward a directive enabling countries to introduce tolls on motorways in order to finance the cost of infrastructure deterioration caused by heavy road vehicles.

Known as the 'Eurovignette Directive', the law was revised in 2006 with a view to extending its scope to more roads and vehicles and to making it possible for governments to integrate other costs – such as congestion, accidents, noise and air pollution – into toll prices (see our LinksDossier on Eurovignette).

[http://www.euractiv.com/en/transport/road-charging-eurovignette/article-117451]

However, due to strong disagreements between member states and Parliament, the final text of the Eurovignette de facto excluded this very possibility until a "common methodology for the calculation and internalisation of external costs that can be applied to all modes of transport" is agreed. The Commission had been due to present a model before 10 June 2008, but this date was postponed slightly due to the switch in commissioner portfolios, which saw the Italian Antonio Tajani take over from Frenchman Jacques Barrot in mid-June 2008.

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The proposals will be part of a broad package on 'greening transport', which will include a general Communication on 'greening transport', a proposal for a review of the Eurovignette Directive and a 'Strategy for the internalisation of external costs' for each transport mode.

The review of the Eurovignette Directive aims to enable governments to charge truck drivers for the costs they impose in terms of congestion, noise and air pollution. http://www.eurotoll.fr/static/en/pdf/Directive-eurovignette.pdf

According to the latest draft obtained by EurActiv, such 'external cost' charges could come on top of those already levied in some countries to finance construction and maintenance work.

No obligations

Member states would not be obliged to impose such taxes but could choose to do so for vehicles weighing more than 3.5 tonnes, on any part of their road network, as of January 2012. Charges would be capped at maximum levels and would have to vary according to the time of day, the distance travelled and vehicles' Euro emissions class type – which takes account of the amount of NOx and poisonous particulate matter emitted (see LinksDossier on Euro standards).

Tolls with barriers would no longer be permitted and the collection of charges would have to be based on an electronic system so as to avoid hindrances to the free flow of traffic, although there would be a transition period up till January 2014.

CO2 costs excluded

Charging trucks for the CO2 they emit would remain forbidden. Indeed, in the draft communication, the Commission explains that although levying a specific CO2 tax on top of the air pollution and noise charges "could deliver additional benefits, it should better be addressed through a more coordinated approach at EU level to reduce greenhouse emissions based on either the Emission Trading System or a common fuel tax element in the Energy Taxation Directive".

Nor would governments be allowed to include accident costs in their road taxes, as the Commission finds that accident risks "are related not only to the distance travelled but also to complex factors such as speeding, driving under the influence of alcohol or failure to use seat belts, hence instruments like insurance rates might be a more effective tool".

Money for sustainable transport

In what is likely to become the main contentious issue with national governments, the Commission is proposing that revenues generated by external cost charges be earmarked towards measures aimed at reducing road transport pollution at source, improving CO2 and energy performance of vehicles and developing alternative infrastructure for transport users, the communication states.

Governments would nevertheless remain free to allocate revenues raised through infrastructure charges as they choose.

A five year wait?

The Commission says it will review the situation in 2013 to determine whether the option of charging truck drivers for the costs they impose on society should become an obligation. "The review will also assess whether the cost of CO2 emissions should be allowed to be included in tolls," states the communication.

But debates in Parliament could see a change in the proposals, as MEPs appear to be far from convinced by the plans so far (see positions).

Positions:

According to the Commission's communication, "the advantages and disadvantages of mandatory versus optional charging schemes for road freight transport were compared. It was found that while there are clear and immediate benefits to be reaped in member states with a lot of traffic, the financial viability of charging systems for external costs in member states with low traffic requires further studies".

Johannes Ludewig, executive director of the Community of European Railway and Infrastructure Companies (CER), told EurActiv that, though the Commission's plans were rather unambitious, the most important part was the acceptance of the principle of internalisation of external costs.

He nevertheless lamented the exclusion of CO2 from the plans, saying: "We are seeing the argument from the Commission saying that from a scientific point of view CO2 should be better internalised by taxes on gasoline or diesel and our view is that theoretically I can follow that, but in reality, seeing the price level of gasoline and diesel today, it is unrealistic that in the forseeable future any taxes on these two will be increased." He further pointed to the contradiction between going for an optional approach and excluding certain pollutants, such as CO2.

While Ludewig would rather have seen an obligation, he said "I think that is simply unrealistic".
But Damian Viccars, in charge of social and fiscal affairs at the European office of the International Road Transport Union (IRU), insisted that a mandatory approach would go against subsidiarity.

He also welcomed the exclusion of CO2 from the plans, saying: "Don't forget that we already have a CO2 tax in the form of fuel taxation. In the majority of cases, we already pay over and above our infrastructure costs through fuel taxes and contribute hugely to government transport budgets," he stressed.

Viccars also felt that congestion charges would amount to another form of "double taxation". "We are already incurring the congestion cost simply by being forced to sit in traffic," he said, adding that the 'polluter pays' system proposed by the Commission is unlikely to have any real effect.

"We are not at liberty to travel when we want," he explained, pointing to consumer needs, night-time delivery constraints and working time restrictions. "The prescriptiveness of the approach will simply cause costs to be passed on to consumers," he said, arguing in favour of a 'Cheapest Cost Avoider Principle', under which it would be left to the party that can prevent or abate the damage at the lowest cost for the overall economy to take action.

Green MEP Michael Cramer told EurActiv that he was disappointed with the proposals: "The Commission's study excludes accident and CO2 costs – the climate costs which are 80% of all the costs that transport is generating," he lamented, adding that he hoped Parliament would vote to toughen up the directive.

"We want fair competition between the modes of transport at least," he said, saying railways were suffering from the fact that most roads are still not covered by the tolls although rail is, as well as the fact aircraft still do not pay kerosene tax despite rail having to pay diesel tax. "That is unfair competition in favour of the modes of transport that are harmful for the climate, and not the opposite," he lamented.

"I hope that the Parliament will vote in a strong way – stronger than the Commission, but the conservatives are against it," he concluded.

To read the interview with Michael Cramer in full, please click here.

But in fact, German MEP Georg Jarzembowski, spokesman on transport for the EPP-ED, told EurActiv that his group thought it was "strange" that the Eurovignette Directive would remain voluntary. "If you want to internalise external costs because of the climate change issue, then all countries should do it," he said.

He further expressed his discontent with the fact that the directive only covers road transport.

"We are a little bit shocked that the Commission only proposes something for the road and is not preparing anything for the other modes of transport," he said.

But he agreed with the Commission that the costs of CO2 need not be included. "We have already today a spreading of the tariff according to Euro One to Euro Six standards – so the more polluting a truck is, the more it has to pay. This is already a type of CO2 criteria in the directive, because the tariff varies according to the pollution," he said, insisting that excluding CO2 from the scope of the Eurovignette does not go against the EU's climate goals.
To read the interview with Georg Jarzembowski in full, please click here.

Next steps:

8 July 2008: Commission to present its package on 'Greening Transport'.

31 Dec. 2010: Proposed deadline for member states to comply with the directive.

31 Dec. 2013: Commission to review progress under the directive and determine whether to introduce binding obligations and allow for the inclusion of CO2 in tolls.

Bully for the UN and its Long Overdue Scrutiny of Funny Money Carbon Dioxide Cap and Trade Emissions Clean Development Schemes!!

Two carbon-market millionaires take a hit as UN clamps down


The Wall Street Journal


April 14, 2008


OXFORD, England -- Marc Stuart and Pedro Moura Costa have become multimillionaires in a booming new market designed to fight global warming.


Now, their empire is under attack.


Their firm, United Kingdom-based EcoSecurities Ltd., helps companies in the industrialized world meet their obligations to pollute less by selling them "credits" that fund clean-air projects in poorer nations. Last year, some $9.4 billion in these credits were traded, up from almost none four years earlier.


The market's anything-goes early days now appear to be ending. United Nations officials who regulate the trade have started questioning scores of proposed projects, from hydroelectric plants in China to wind farms in India. The issue: whether they provide real environmental gains, or are just padding the pockets of middlemen like EcoSecurities.


[Marc Stuart]EcoSecurities' woes are a prime example of how tough it is proving to be to launch a coordinated world-wide attack on global warming. The carbon-credit industry's growing pains come just as Congress is considering similar pollution-cutting rules targeting U.S. industries.


EcoSecurities is one of the main players in an international market that was created as part of the Kyoto Protocol to combat global warming. A key premise of the system is that, because greenhouse gases damage the atmosphere no matter where they originate, society should attack them first where the cleanup is cheapest, in the developing world. But policing that far-flung market has proved to be tricky because it involves valuing a commodity, climate-warming emissions of gas, that is far less tangible than oil or gold. [Go to map.] See a map with photos and details on some of EcoSecurities' top credit-generating projects world-wide.


The "credits" sold by EcoSecurities and its rivals are supposed to fund clean-air projects in the developing world that otherwise wouldn't get built. But the U.N. is worried that players in the market may be gaming the system by putting a green imprimatur on some projects that would have happened anyway, defeating the intent of the U.N. program.


The tougher U.N. scrutiny is necessary to "ensure the environmental integrity of the system, because otherwise it's not achieving its purpose," says Kai-Uwe Barani Schmidt, the top administrator for the U.N. board that referees this trade.


EcoSecurities is one of the largest and most aggressive of a dozen or so major firms that scour the globe for projects like these, then profit by selling credits to help fund them. The main buyers are companies in Europe and Japan, whose governments have ratified the Kyoto Protocol, a global agreement imposing pollution caps on industrialized nations. Like EcoSecurities, most of the project developers are based in Europe.


[LIKE ECO-SECURITIES, MOST OF THESE COMPANIES, INCLUDING THAT OWNED BY AL GORE GENERATION INVESTMENT MANAGEMENT (GIM), STAND TO PROFIT HANDSOMELY OFF OF ORDINARY CITIZENS AND FROM CORPORATIONS IF THE UNITED NATIONS DOES NOT CAREFULLY SCRUTINIZE SUCH PROGRAMS AS IT IS OBLIGED TO DO]


That business is now in turmoil. Late last year, EcoSecurities said it would fail to deliver one-quarter of the credits it had promised. Its stock has fallen nearly 70% since that write-down -- and 80% since its peak last summer. The firm's two co-founders, Messrs. Stuart and Moura Costa, have lost about $147 million on paper due to the stock's overall decline.


Mr. Stuart acknowledges that his firm, in its race to dominate the field, sometimes pushed the envelope. "The first couple of years, this business was a land grab," he says. But many projects, he says, didn't generate as many credits as originally estimated, leading to last year's big write-down.


[IN OTHER WORDS, THE PUTATIVE ENVIRONMENTAL BENEFITS WERE OVERSTATED AND THE COSTS TO SOCIETY UNDERSTATED]


The firm's approach "was very successful at first, but it did leave a bit of a mess to clean up," says Mr. Stuart, a former Ultimate Frisbee champion at the University of Pennsylvania, who holds a master's degree in environmental law and economics from the London School of Economics. He is frank about the problems the industry faces.


"I guess in some ways it's akin to subprime," says Mr. Stuart, 43 years old, referring to the subprime-debt woes rattling the U.S. economy. "You keep layering on c- until you say, 'We can't do this anymore.'"


Pushing Back


EcoSecurities has helped assemble about 10% of all developing-world projects approved so far by the U.N., more than any other player. Its main rivals include Camco International Ltd., which says it, too, has had projects delayed. Another rival, AgCert International PLC, says the tightening of U.N. rules has contributed to the company's filing for protection from creditors in Ireland, its home country.


EcoSecurities is pushing back. It notes that the vast majority of its projects ultimately get approved. And it argues the U.N. crackdown hurts the environment more than it helps, since it delays clean-air projects and cuts off a funding source. It says regulators have failed to set clear rules -- and now they're changing their standards midstream.


One thorny issue: Who should vouch for the quality of clean-air projects? EcoSecurities says the U.N. scrutiny adds bureaucracy because it duplicates work already done by independent auditors who are hired to vet all projects. The U.N. panel should stick to an "executive and supervisory role," EcoSecurities says.


U.N. officials have questioned whether the auditors have been tough enough. The concern centers on whether auditors, who are hired by project developers, are adequately staffed to police the environmental legitimacy of the swelling number of projects. The auditors strenuously defend the quality of their oversight.


[THIS MEANS THAT THE AUDITORS NEED TO BE AUDITED!]


While that debate rages, EcoSecurities has been busy refocusing on projects less likely to raise red flags. For instance, it is shifting to projects to curb secondary greenhouse gases, such as nitrous oxide, produced in obscure industrial processes like nylon making. The problem, as EcoSecurities executives point out, is that targeting secondary gases does nothing to combat fossil-fuel use, which according to the U.N. is the primary man-made contributor to global warming.


[MORE SMOKE AND MIRRORS]


The situation is "extraordinarily frustrating," Mr. Stuart says.


The trade in developing-world credits results from a provision of the Kyoto Protocol called the Clean Development Mechanism. A 10-member U.N. board vets proposed projects to ensure their environmental legitimacy. The independent auditors accredited by the U.N. act as the board's field inspectors, traveling the globe to certify whether a project is up to snuff.


Each credit is essentially a permission slip to emit one ton of carbon dioxide into the atmosphere. Currently these credits sell for $16 to $24 apiece.


EcoSecurities went public in late 2005 and was an immediate market darling. Mr. Moura Costa, 44, a Brazilian forestry expert living in Oxford, recalls that by early 2006 he was telling the firm's lawyers to ink contracts for new projects at the rate of one per working day. "It was a madhouse," he says.


Permissive Board


Over the next 18 months, EcoSecurities contracted more than 200 additional projects around the world -- from Nicaragua to Inner Mongolia -- promising tens of millions of emission credits. Its stock price nearly tripled. Messrs. Stuart and Moura Costa became multimillionaires on paper.


EcoSecurities' rise coincided with a permissive U.N. board. In 2004 and 2005, the board automatically approved 95% of the projects proposed to it, according to U.N. statistics. [A Leader Stumbles]


Mr. Schmidt of the U.N. says the board was thinly staffed at the time. By its current standards, he says, some proposals "probably went through without" proper scrutiny.


In mid-2006, there was an early hint that regulators were toughening their stance. The issue: manure.


[DO THEY MEAN MANURE AS A NOUN OR AN ADJECTIVE?]


Decomposing manure at farms emits methane, a greenhouse gas. The projects involve placing a tarp over the manure to capture and dispose of the rising gas. EcoSecurities expected at least 10% of its credits to come from projects like these.


But in 2006 the U.N. tightened its rules, requiring animal farms to measure the amount of methane they were capturing rather than simply estimating the number based on a formula -- and use the lower number. That move slashed by more than one-third the number of credits a typical animal-waste project would produce for sale.


[SIMPLE ESTIMATES ARE LIKELY TO PRODUCE INCORRECT DATA]


Suddenly, the projects no longer made economic sense, Mr. Moura Costa says. EcoSecurities canceled most of them, erasing about $100 million in potential profit.


Still, investors remained impressed with the company, because it continued to grow. Last July, with the stock near its peak, Mr. Stuart sold 2.2 million shares for about £8 million, or about $16 million, and Mr. Moura Costa sold 1.3 million shares for about £5 million as part of a secondary offering, according to financial filings. The two men remain the biggest shareholders with a 20% stake between them.


Having money was a big change for the two men, Mr. Stuart says, recalling that when EcoSecurities was young he routinely charged up thousands of dollars of debt on his credit card to help keep it operating. After the stock sale, Mr. Stuart traded his 1994 Mercury Sable for a $55,000 black Lexus hybrid sedan.


Around then, the U.N.'s crackdown started in earnest. The U.N. staff zeroed in on projects they had reason to believe might be financially viable even without revenue from the sale of credits.


Last year, the U.N. board gave automatic approval to only 57% of proposed projects, down from 95% in 2004 and 2005. Overall, it rejected 9% of proposed projects last year, more than double its rejection rate in 2006.


One of the proposals blocked was an EcoSecurities project at a grain-processing plant in Uberlandia, Brazil, to replace oil-fired boilers with one using renewable energy like scrap wood. The U.N. said EcoSecurities hadn't proved that it needed revenue from selling credits to make economic sense.


EcoSecurities wasn't surprised the project got shot down: The company's own calculations showed that replacing the boilers made marginal economic sense even without the sale of credits.


The project "was in the gray zone" of the rules, Mr. Stuart says. He likens the U.N. panel to the Internal Revenue Service: "You push things as hard as you can, within what you think are reasonable guidelines. But every now and then the IRS will push you back."


[ANYTHING GOES THAT CAN BE GOTTEN AWAY WITH!! CLIMATE CHANGE CHICANERY]


Value Judgment


The U.N.'s Mr. Schmidt says it doesn't surprise him that borderline projects like these get submitted. "If I were not to expect such behavior, I would be living in the wrong world," he says. Nevertheless, he says, "I don't see this particular case as trying to cheat."


[IS MR. SCHMIDT KIDDING? 'BORDERLINE' PROJECTS?? NOT TRYING TO CHEAT??]


Determining whether or not a project needs carbon-credit revenue is "a value judgment," he says. "It is one of the biggest challenges" of the carbon trade.


[SUBJECTIVE VALUE JUDGMENTS SERVE AS BASIS FOR ADJUDGING CLEAN DEVELOPMENT PROJECTS ECONOMICALLY VIABLE??? NO OBJECTIVE BENCHMARK STANDARDS?? DOESN'T THIS OPEN UP THE DOOR TO FRAUDULENT ACTIVITY???]


Mr. Schmidt, who has known Messrs. Stuart and Moura Costa for more than a decade, says he respects the company. "We have a very good relationship," he says. "We also know we have certain roles to play."


[IS MR. SCHMIDT TRYING TO COVER HIS TAIL (ENGAGING IN 'CYA') BECAUSE OF HIS INSIDER RELATIONSHIP WITH MESSRS. STUART AND MOURA COSTA AT ECO-SECURITIES???]


U.N. officials acknowledge that calculating whether a project can be economically viable without carbon-credit revenue is subjective. For instance, the calculus can swing widely based on whether oil prices surge, or fall. Similarly, it involves guesstimates of how long a project -- whether a hydroelectric generator or methane-recapture effort -- will remain operable.


EcoSecurities has more than 100 projects approved by the U.N., and only a handful rejected. But many of its proposed projects now are being held up by the U.N. for review. That's bad news for EcoSecurities because it delays its ability to start selling credits. The company originally operated on the assumption that U.N. approvals would take two months, on average. But now they're taking an average of nine months.


Obsessed with Detail


Starting last year, the regulators were "getting more and more obsessed with detail," raising questions that weren't relevant to projects' environmental integrity, Mr. Moura Costa recalls. He and other EcoSecurities executives expressed frustration to U.N. officials. The company's message, he says: "This is ridiculous."


[SORRY, BUT YOU MUST ACCOUNT! BUT WHO WILL INDEPENDENTLY OVERSEE /AUDIT THE UN COMMITTEE HERE?? SHOULD THE U.S. GOVERNMENT APPOINT A SPECIAL PROSECUTOR??]


Last fall, concern about the U.N.'s more activist role boiled over at EcoSecurities' headquarters here in Oxford. The company uses a computer database it calls "Carbo" to monitor the rate at which its projects produce credits. As the U.N. clamped down, Carbo's "siren was going off," Mr. Stuart recalls.


In October, EcoSecurities executives gathered in the boardroom to confront a striking reality: In the space of months, the entire landscape of their industry had changed. Poring over their biggest projects, they debated how much of their business would need to be simply written off.


A big write-down "would have significant consequences to the company," Mr. Moura Costa recalls warning.


[A HUGE WRITE-DOWN WILL EXPOSE THE COMPANY FOR WHAT IT REALLY IS - A FRAUD AND OPPORTUNIST!]


Ultimately, on Nov. 6, the company announced its write-off of 23% of the credits it had promised to deliver. Its stock fell 47% that day.


Since then, the stock has fallen further. It closed Friday on the London Stock Exchange's AIM at 84 pence, giving it a market capitalization of £94.9 million.


Last month, EcoSecurities, which has 300 employees in 30 offices world-wide, reported a widened loss for last year of €45 million on revenue of €7.2 million.


EcoSecurities' largest shareholder, other than the two founders, is banking giant Credit Suisse, which bought an approximately 9% stake last summer when the stock was near its peak. Since then, Credit Suisse has lost two-thirds of its $60 million investment.


"We don't believe the market is valuing the stock fairly," says Paul Ezekiel, who heads Credit Suisse's carbon business and who sits on EcoSecurities' board.


SUCH DEFENSIVE STATEMENTS ARE SELF-SERVING, DISINGENUOUS AND A HEDGE AGAINST A FURTHER DEVALUATION OF ITS FINANCIAL INTEREST IN ECO-SECURITIES. FUNNY HOW CREDIT SUISSE'S REINSRUANCE AFFILIATE HAS BEEN OUT IN THE MARKETS SELLING 'CLIMATE RISK MITIGATION SERVICES' SINCE AT LEAST 2003. PERHAPS CREDIT SUISSE OWNS SUCH A POLICY WHICH WILL COVER THIS TYPE OF LOSS??]


Given the lack of clarity in the U.N.'s rules, it's not fair to fault EcoSecurities for trying to maximize the number of credits it produces, he says. "It's like saying the speed limit's going to be between 50 and 90. So do you drive 55 or do you drive 85?"