European Commission and EU ETS nominated for the Greenwash Circus Awards 2013

The EU ETS is the EU's flagship policy to address climate change. It was introduced in 2005 and has now become the largest carbon market worldwide1. The EU ETS includes ‘cap and trade’ and ‘offsets’ systems which allow participants to buy and sell emissions permits and offset credits in order to comply with their reduction targets or simply to make a profit on the market.

But the EU ETS is not reducing emissions. It is not moving industry to tackle the structural changes needed to reduce emissions at source in Europe. Instead, it has helped to locked in an economic system dependent on polluting extractive industries – and has worked as a subsidy for the worst polluters, translating it into enormous windfall profits. On top of this, emissions trading allows polluters to falsely present themselves as 'green' or 'carbon neutral' without making any changes in their high levels of emissions.

Take the example of steel giant ArcelorMittal. They have lobbied national governments and the European Commission hard to get far more permits to emit than they need, and to keep getting them for free. But they did not need as many permits as they claimed, even less due to the reduced production due to the economic crisis.

So for quite some years in a row, ArcelorMittal is the company with the biggest surplus of emission permits (123,213,532 in 2011), with an estimated value of €1,580 million. They can choose to sell them an make windfall profits, (they have confirmed that they have revenues of €250 million as a result of this), or they can keep it and sell it later if carbon prices are higher, or use them for the current phase of the ETS, and then they do not need to make anything to meet their cap. Considering all the 'extra' credits companies can buy from outside the EU, at the end, there is no longer any cap.

But this is not an isolated case. Companies all over the EU are easily off the hook from dealing with their high levels of pollution.

There are several other structural failures of the ETS. Among others it has volatile and declining carbon prices; it increases social and environmental conflicts in Southern countries where the offsets projects are located; it is susceptible to fraud and it uses public money for setting up a market benefiting private interests.

This is why over 140 groups are calling to scrap it, and make room for effective climate policies.

Despite its failure, the European Commission is greenwashing the ETS claiming it is the 'best' option we have, and is determined to keep the ETS as the main climate policy – quote of Hedegaard

Not only this, with the help of the World Bank the EU is actively selling the system to other countries to replicate the failure. Carbon markets modelled after the ETS have started or are being planned in countries such as China, Brazil, South Africa, Australia or California (US).

And more worryingly, the European Commission is working hard to export the logic of commodifying nature so it can enter markets into other areas such as forests, biodiversity or water, all the time claiming that the ETS is a big success and that it only has teething problems that can be fixed. It is time to expose the ETS for what it is: a greenwashing scheme for polluters to continue business as usual.

• 1. The EU ETS operates in 30 countries: the 27 EU Member States plus Iceland, Liechtenstein and Norway and Croatia. It covers emissions from approximately 11,000 heavy energy-using installations, including power stations, combustion plants, oil refineries and iron and steel works, as well as factories making cement, glass, lime, bricks, ceramics, pulp, paper and board, representing 45% of total EU emissions.