Hungary burns carbon credibility propping up budget

Hungary - a major seller of carbon credits– will weaken its credibility in the growing international carbon markets by using revenues to prop up its budget rather than green its energy production, WWF-Hungary has warned.

Mr Imre Szabo, the Minister of Environment, announced that “the Ministry will cut its annual budget this year by freezing 67 million Euros from its 2009 Kyoto carbon trading revenues”.

According to WWF-Hungary, this will not improve the budget balances, create jobs or decrease the country’s energy dependence on gas and oil but it will bring into question the validity of Hungarian carbon credits.

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Hungary had recently settled deals with Spain of 6.6 million AAUs (Assigned Amount Units is the trading unit of the Kyoto carbon trading system) and Belgium of 2 million AAUs – on the basis of projects to be undertaken through the country’s planned Green Investment Scheme (GIS).

“The Belgians have already criticized Hungary for being late with greening projects and freezing carbon trade revenues will only frustrate them even more”, said György Dallos, climate change programme officer of WWF Hungary.

The Hungarian government already has a track-record in undermining carbon trading revenues, WWF said. Although the Ministry of Environment had prepared the draft of the National Allocation Plan for the years 2008 to 2012 a year ago, the Budapest government has been unable to have it approved by the European Commission so far. 

The delay is estimated to have cost Hungary €5 million due to an inability to fully participate in auction revenues under the European Quota Trading System (ETS) at a time when higher prices prevailed.

Halting or slowing the pace of investment in green technologies is also running counter to world trends of increasing such spending. 

“President Barack Obama, Prime Minister Gordon Brown as well the Canadian, the German, the Australian and many other governments agree with Sir Nicholas Stern that supporting green investments in energy efficiency and renewables is an effective tool to save and even create millions of jobs and decrease energy bills,” Dallos said.

The German “Alliance for Work an Environment” programme saved and created 145.000 jobs and saw 342.000 flats had been retrofitted for energy effiency in the difficult recession period of the German construction industry between 2001 and 2006, Dallos noted.

“If 1.8 million badly insulated Hungarian family houses were insulated within a 5-year period, it would create tens of thousands of jobs all over the country,” Dallos said.

“In addition to that, 1.5 million cubic metres of imported Russian gas, as well as 3 million tons of greenhouse gases, would be saved annually, thereby reducing energy costs. This would bring relief to millions of Hungarians.”

Other WWF Hungary proposals for new and sustainable energy politics include saving hundreds of millions of Euros by eliminating the current gas price support system and increasing “ridiculously low” mining fees on lignite could cut budget deficits and decrease energy dependency. 

Additionally the Government could also stop supporting the Vertes Coal Plant through the “coal penny” system collected on every Kilowatt-Hour consumed in the country.

Another efficient way to save government money is stopping the state owned Hungarian Energy Company (MVM) to build a new lignite plant which would never reach a break even given current conditions. 

“MVM, the largest state owned company, is sitting on piles of cash thanks to the exceptionally high profits in the last two years,” Dallos said. “So far the government has hardly touched these profits in order to establish a new sustainable energy policy for a brighter future of Hungary.”