It’s all in the context . . .

After a short telephone interview yesterday, I was quoted in the Guardian newspaper today, but unfortunately completely out of context. Based on the interview, The Guardian chose to position Shell as opposing action in Copenhagen, which couldn’t be further from the truth. In fact the conversation was about the application of a floor price for the EU-ETS.  You may be interested in my reply which I hope will be published on Monday.

Dear Sir,

In today’s article “Shell opposes moves to reform carbon trading”, you chose to open with the assertion that Royal Dutch Shell is opposing moves to overhaul Europe’s carbon trading scheme at the crucial climate change summit in Copenhagen in December. This statement is incorrect on several counts;

  1. Copenhagen is not and will not be a forum for discussion on the detail of the EU Emissions Trading System (EU-ETS). Copenhagen is a United Nations Framework Convention on Climate Change (UNFCCC) meeting where we, along with many others, hope that our political leaders can agree a broad, workable framework within which nations and regions can seriously address the issue of climate change. The EU-ETS is one element of the domestic policy arrangements that the EU have put in place to meet their proposed goal of a 20% reduction in emissions by 2020, in comparison with 1990. Its structure and design is a domestic discussion, not a discussion for UNFCCC meetings, although elements of how it may link to other domestic approaches (such as that being developed in the USA) could possibly be discussed at the UNFCCC.
  2. Shell, initially as almost a lone voice but now with others, has supported the EU emissions trading approach since the first draft Directive was circulated for consultation in 2001. In 2008, when the EU-ETS was overhauled as the EU Commission crafted Phase III of this legislation (to run from 2013-2020), Shell maintained its strong support for the development of the system. Whilst we have not agreed with every part of every article within the Directive, we have maintained the view that industry should engage in a constructive dialogue with the EU Commission on this legislation.
  3. There are no moves to overhaul the EU-ETS as this has just been completed. The legislation was passed by the EU Parliament in December 2008 and was published in the Official Journal of the EU Parliament only four months ago.

However, the quote that you did include from me was correct. Shell does not support a floor price within the EU-ETS. This is a market based system and the market needs to be left to find the price that is required to deliver the necessary reductions to meet the clear environmental objective of the system. Today, as a result of the financial crisis and a consequent reduction in emissions across the EU due to lower industrial activity, the market is telling us that it can meet the 2020 20% reduction objective at a price of around EUR 15. We should respect this and allow the market to do its job. The lower price is coming at a time when EU consumers are tightening their belts so they may welcome this reduction in price, which feeds primarily into their cost of electricity.

 We also note that there is no specific mechanism within the design of the EU-ETS to set a floor price. However, EU governments do auction allowances into the system so they could choose to set a reserve price at those auctions. But the majority of allowances are still provided free of charge to EU emitters and that practice will continue for three more years. By then, we may be seeing quite a different set of market conditions and even a different overall 2020 target, as the EU has a provision to shift this to 30% should it be a signatory to a new international agreement.

 Yours sincerely,

David Hone

Senior Climate Change Adviser

Shell International

Guardian Article