EDITORIAL: by Peter WestmoreNews Weekly
Making sense of carbon-trading
, June 23, 2007
The Government should consider other options before it burdens our economy with emissions taxes.The Howard Government is keen to show it is serious about the problem of human-induced climate change, although the debate is still raging. To this end, the Prime Minister has announced that he is moving to establish a national carbon-emissions trading system by the end of 2012, as recommended by a taskforce he appointed last December.
Separately, the state and territory Labor governments have set up a national emissions-trading taskforce, which is investigating a scheme for emissions-trading by the end of 2010.
The aim of these proposals is to put a price on the emissions of greenhouse gases, particularly CO2
, with a view to progressive reductions in the years ahead.
The Federal Government proposal, as set down by the taskforce, envisages the establishment of a "cap and trade" system, in which the government determines limits on greenhouse gas emissions (that is, sets a target or cap) and issues tradable emissions permits up to this limit.
Beyond that, they must be bought from the government, i.e., they are a tax.
Businesses must hold enough permits to cover the greenhouse gas emissions they produce each year. Under the taskforce recommendations, permits can be bought and sold, with the price determined by the supply of and demand for permits.
Similar schemes are in operation in Europe and in parts of the United States. They are also proposed for Canada and New Zealand.Costly failure
The European Union (EU) describes its Emission Trading Scheme, established in 2005, as the largest multinational greenhouse gas emission scheme in the world. It is the centre of the EU's campaign to cut greenhouse gas emissions. It is also a costly failure.
The Climate Action Network, an umbrella group of some 350 environmental organisations, of which 100 are in Europe, issued a report which stated that only two of the 25 EU states (UK and Germany) asked participating industries to reduce emissions below historic levels, and found that in the 15 old EU member states as a whole, allocations were 4.3 per cent higher than the base year.
The British reached their target by closing down the domestic coal industry and importing from abroad, while Germany cut greenhouse emissions by closing down dirty old Soviet-era power stations in Eastern Germany.
In May 2006, when several countries revealed that their industries had been allocated more allowances than they could use, trading prices crashed from about €30 ($50)/tonne to €10 ($17)/tonne, and have since declined further to €4 ($7) in January 2007, and below €1 ($1.60) in February 2007.
Countries like Sweden have committed themselves to cutting CO2
emissions by closing older coal-fired power stations and building nuclear power plants.
Most countries in the European Union have failed to meet their Kyoto Protocol commitment to cut CO2
emissions. Those which have "reached" the target have usually done so through what are known as "international credits", that is, by purchasing emission permits from overseas to bring themselves within the Kyoto targets.
Another method of purchasing carbon credits is in bankrolling reforestation programs, which are supposed to "lock up" CO2
in trees. In fact, trees' absorption of CO2
is minimal in their early years, and eventually, when the tree dies, the CO2
is returned to the atmosphere.
All of this basically is a manipulation to make it appear
that countries are achieving measurable reductions in greenhouse gas emissions when in fact they are not.
Reading the report of the Prime Minister's Task Group on emissions-trading, the EU scheme is described in glowing terms. It said, "The European Union has committed to meeting its Kyoto reduction target and has introduced a domestic emissions trading scheme to that end. In March 2007, the European Union adopted a package of new climate change and energy security measures."
Its failings were not even mentioned.
There can be little doubt that the taskforce's objective was to solve a political problem rather than an environmental one, and to minimise the potential damage to Australian industry, particularly the export industries.
If Australia and other countries wished to preserve fossil fuel resources as well as cutting greenhouse gas emissions, they would be looking at encouraging nuclear power and the use of biofuels, which recycle atmospheric CO2
through plants, into ethanol and biodiesel. This recycling process substantially cuts net CO2
A few other countries have already established very large biofuel industries. Brazil, which produced 18 billion litres of ethanol in 2004, was the world leader in ethanol production until it was recently overtaken by the US. Brazil's output is currently being expanded to produce biodiesel.
If Australia was serious, it would forget about emissions trading, and invest in biofuel technology instead.- Peter Westmore is national president of the National Civic Council.