Environmentalists are undermining their cause by defending emissions trading

We should hope that the British government realises what the EU does not and withdraws from the EU ETS and presses for its dismantling, replacing it with a simple carbon tax

Just what are so called environmentalists looking for?
David Merlin-Jones
On 6 January 2012 17:05

On Wednesday, the Guardian published an article in ‘Comment is Free’ dismissing the claims made in Civitas’ latest report, CO2.1: Beyond the EU’s Emissions Trading Scheme.

Damien Morris, the author of the article and senior policy advisor at Sandbag, described the report as ‘cynical’ and containing ‘remorseless pessimism’. What is the report’s crime? To argue that the EU’s flagship environmental scheme delivers no environmental benefit and is being manipulated by governments, businesses and bankers for profit and should therefore be scrapped.

There was no discussion of the report’s positive messages of alternative ways to reduce carbon emissions, if that is what we must do, for much less cost while also reducing the future price of energy.

When I contacted the Guardian to respond to the misrepresentation and one-sided discussion, they were not interested. So here I am, defending my case on a more reasonable platform.

Firstly, a brief explanation of the EU’s Emissions Trading Scheme (EU ETS). It is a cap-and-trade mechanism, so there is a maximum level of CO2 emissions allowed in the participating countries per annum. This level is represented by tradable credits given to the 10,000-odd installations covered by the scheme, primarily factories and power stations emitting the most carbon.

At present, installations are given a number of credits for free and must buy more if they emit more CO­2 than their credits permit. If they have spare credits, these can be sold on for profit. The idea is that as the cap falls, credit prices rise so companies will invest in reducing their emissions.

The Guardian article does not refute the most crucial arguments of the Civitas report that serve as our foundation for recommending its scrapping on an environmental basis. The CO­2 caps for 20 countries this year are still higher than actual emissions in 2005. Our research has independently found that the oversupply of credits to industries means many companies will not have to do anything about their emissions until 2016-18, over ten years since the ETS began.

My key issue with the article is the claim that our report is about defending industry (‘…industrial sectors that Civitas appear so keen to protect’). While I would be the first to state that my research is aimed at strengthening British industry, I would not say that it is a good thing for big companies such as ArcelorMittal or Lafarge to receive free ETS credits and then sell them for €172m and €300m respectively. Indeed, this represents the whole reason the EU ETS is flawed.

While some companies receive vast numbers of credits they do not need, smaller ones face huge costs buying them. The average energy-intensive company faces an extra £3m on their energy bills by 2020 because of the ETS. The System is not fair.

The article also claims that our warning that airlines will raise their ticket costs because of their inclusion in the ETS is rubbish. It is an awkward fact then that Reuters reported on Monday that Lufthansa ‘told passengers on Monday to brace for higher ticket prices as it refuses to shoulder the costs [of the EU ETS]’.

Our other message, that extra-EU airlines are likely to try to avoid flying into and out of Europe if they are included was also dismissed, on the same day that Airlines for America announcedexactly that: ‘some global airlines are considering whether it is feasible to avoid landing in Europe during some of their connecting flights to dodge the EU charge.’ It is hopelessly naïve to suggest, as the article does, that including EU and non-EU airlines ‘should be applaud[ed]’. If the EU forces extra-EU inclusion, this is already leading to trade wars, boycotting and lost business, and if it relents, European airlines will face addition costs that their rivals do not. Ultimately, it is a lose-lose situation.

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