Carbon markets are supposed to make polluters pay, encouraging investment in carbon-cutting kit.
Yet a provision in the EU’s flagship emissions trading scheme mean it is doing the opposite, Carbon Market Watch warned in a report on Tuesday: subsidising coal.
Poland, Romania and Czechia are the biggest beneficiaries of free permits worth an estimated €12 billion over 2013-19, analysts found.
The handout was supposed to support “modernisation” of the power sector in poorer EU states. In 2013, far from bringing in new, clean sources, 90% went to upgrade existing fossil fuel infrastructure.
That included investment in Europe’s most polluting plant, the lignite-fired Belchatow in Poland.
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“This provision has so far not resulted in the diversification of the energy mix in lower-income Member States,” said author Urska Trunk.
“Quite the contrary, it will lock them in carbon intensive energy production and investment uncertainty.”
The NGO called for coal projects to be excluded from the fund and renewable or energy efficiency schemes be given priority.
Climate Action Network Europe agreed. “To turn carbon trading into a tool that helps end our addiction to fossil fuel, especially coal, polluter handouts must end,” said coal policy expert Joanna Flisowska. “This will boost investments in renewables and energy efficiency.”