In the second of the linked articles below, Andy Atkins, from Friends of the Earth, argues that the European Emissions Trading Scheme (ETS) has failed to make any substantial cuts is emissions and is creating the opportunity for carbon traders to become very rich in increasingly complex financial products based on carbon. “This risks the development of sub-prime carbon and financial crisis – with a double whammy this time of environmental catastrophe to match.” He thus argues for alternative methods of reducing carbon, such as green taxes, tough regulation and government investment in green technology
But is the ETS a failure? In the third article, Alexandra Galin, from the Carbon Markets & Investors Association, argues that the second phase of ETS (2008–12) is much more successful than the first (2005–7) and that substantial carbon reductions have been achieved. Her argument is that a carbon trading scheme’s success in cutting carbon emissions does not depend on the trading system, but on the tightness of the cap. In other words, in a ‘cap-and-trade’ system, it is the cap that reduces emissions; the trading simply achieves the reductions in the most efficient way.
Friends of the Earth attacks carbon trading (including video) Guardian, Ashley Seager (5/11/09)
Don’t let the reckless City trade carbon Guardian, Andy Atkins (5/11/09)
The European emissions trading scheme is now a success Guardian, Alexandra Galin (17/11/09)
Storm could follow calm in EU carbon market Reuters, Nina Chestney (11/11/09)
Carbon market clouded by uncertainty BBC News, Damian Kahya (11/11/09)
See also: Gathering momentum on tackling climate change? (May 2009 blog)
Details of the European Emissions Trading Scheme can be found at:
Emission Trading System (EU ETS) European Commission, Environment DG
Questions
- Explain how the European Emissions Trading Scheme works.
- What are the advantages and disadvantages of the ETS as a means of reducing carbon emissions?
- Compare theses advantages and disadvantages with those of green taxes.
- How does the market price of carbon traded within the scheme reflect the toughness of the policy? What else might the price reflect?
- What is likely to happen to the carbon price in the coming months? Explain.
Until changes in their governments, both the USA and Australia were unwilling to sign up to the Kyoto Treaty on climate change. But things are changing. In both countries, cap and trade bills have been proposed by their administrations (see A changing climate at the White House). In the USA, President Obama’s bill would see the imposition of carbon quotas aimed at achieving a reduction in greenhouse gas emissions by 2020 of 17 per cent, with emissions trading allowing an efficient means of achieving this. In Australia, Kevin Rudd’s Labor government plans to introduce quotas and emissions trading in 2011 to achieve a 25 per cent reduction in greenhouse gases by 2020.
But are there lessons to be learned from the European Emissions Trading scheme? The following articles look at some of the issues.
Cap-and-trade off Houston Chronicle (23/5/09)
US climate change bill passes key hurdle Telegraph (22/5/09)
Obama climate change bill defies Republicans to pass key committee Guardian (22/5/09)
Cap and Trade Debate CNN (video) (22/5/09)
Historic emissions trading scheme bills tabled Sydney Morning Herald (14/5/09)
A pattern behind fire and flood Sydney Morning Herald (25/5/09)
Interview with Australian Climate Change Minister, Penny Wong ABC (21/5/09)
Can Copenhagen achieve much? ABC PM programme (includes link to audio) (20/5/09)
Plunging price of carbon may threaten investment Independent (9/2/09)
EU ETS emissions fall 3% in 2008 Environmental Expert (18/5/09)
European investors call for carbon trading revamp businessGreen (20/5/09)
The carbon scam 21st Century Socialism (19/5/09)
Economy and the environment: growing pains Guardian (17/5/09)
See also
European Union Emissions Trading Scheme Defra: emissions trading
Questions
- Discuss the merits and problems of cap-and-trade systems for reducing carbon emissions in an efficient and effective way.
- Is the price of carbon a useful indicator of the success or otherwise of cap-and-trade schemes to reduce greenhouse gas emissions?
- In what ways does the current recession (a) aid, and (b) hinder the introduction of tougher schemes to tackle global warming?
In a major break from the policy of the Bush administration, President Obama has announced that the US government will regulate greenhouse gas emissions. The US Environmental Protection Agency has found that CO2 emissions pose a ‘threat to public health and welfare’. This finding allows regulation to be imposed.
At the end of March the Democrats in the House of Representatives released a draft climate change Bill. Central to this would be a system of tradable permits. ‘Under this program, covered entities must have tradable federal allowances for each ton of pollution emitted into the atmosphere.’ (See 4th article below.)
U.S. in Historic Shift on CO2 Wall Street Journal (18/4/09)
Obama to regulate ‘pollutant’ CO2 BBC News (17/4/09)
US says CO2 is a danger to human health Financial Times (18/4/09)
House releases draft climate change bill Power Engineering International (31/3/09)
U.S. Carbon Emissions Trading Core of Clean Energy Bill Environment News Service (31/3/09)
Environmental Capital (see also) Wall Street Journal (31/3/09)
Who’s going to get the carbon pollution credits? Christian Science Monitor (14/4/09)
Questions
- To what extent is the EPA ruling compatible with the bill proposed by the Democrats?
- Is a ‘cap-and-trade’ system (i.e. tradable permits) the best way of dealing with climate change?
- What lessons can the USA draw from the European Emissions Trading Scheme in designing its own tradable permits scheme?