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Response to the European Commission’s Consultation on child safety and mobile phone services

A robust carbon price signal is necessary to achieve the advocated long term transformations of European economies in an efficient way. The European Union aims at reducing its greenhouse gas emissions by at least 80% compared to 1990 by 2050. The technological and organizational changes necessary over time to reach this target are yet widely unknown today, and so are the associated costs. For theses transformations to be organized and economically efficient over time, the use of a carbon price signal is crucial in order to influence the operational and investment decisions of actors throughout the economy. The risk of a continuing faint price signal is that Europe will then have to engage in a more costly emission trajectory, because of carbon lock-in and uncoordinated policies. To fully play its role, the price signal must be politically robust from the short to the long term. The value of emissions allowances relies on the credibility of the emission constraint over time. Surplus allowances are frequently observed in allowance markets, but they can co-exist with high prices. As observed in the US SO2 market (see Figure 1) and Phase 1 of the EU ETS, surplus allowances are used by participants for banking, and are not a flaw in the system, provided that banking is permitted and that the longer term constraints are anticipated as quantitatively ambitious and politically credible. The currently low level of the EU carbon price is due to (1) the fact that EU ETS emissions are on line with the explicit reduction target of 2020, and (2) the fact that the longer term ambition of the policy is still widely unclear, both quantitatively and politically. The justification for any market intervention is important, as it determines the possibility and nature of future interventions, and shapes the market's expectations of such changes. It will always be difficult to determine the precise cause of declining EU ETS emissions. As acknowledged in the report, an important share of the required internal reductions can be due to external factors (economic cycles, use of carbon offsets, overlap with other European or unilateral national policies). The sectoral, geographical and temporal effects of those external factors are difficult to anticipate, and will surely keep arising in the future. As a consequence, " one-shot " intervention would not restore the robustness of the carbon signal, and a deeper reform is needed to sustainably restore the carbon price …