CLIMATE CHANGE: by Peter WestmoreNews Weekly
Why EU emissions trading scheme faces collapse
, May 11, 2013
The collapse of the European Union’s emissions trading scheme (ETS) appears imminent, with the price of EU carbon dioxide (CO2) permits falling from a peak of about €30 ($37) in 2008 to as low as €2.46 ($3) last month, after the European Parliament rejected a proposal to delay the sale of 900 million CO2 permits in the world’s biggest carbon market.
The collapse of the EU scheme has direct implications for the future of Australia’s carbon tax, as the Australian scheme is linked to Europe’s. The Gillard government’s carbon pollution reduction scheme (CPRS) began with a carbon tax and will shift to an emissions trading scheme linked to the EU’s in 2015.
Despite claims that the problems in Europe are the result of the eurozone crisis, this is only a small part of it.
Emissions trading schemes are designed to “put a price on carbon”, that is, to drive up the cost of fossil fuels (particularly coal), to make the more expensive renewable energy more attractive and to provide a new source of revenue for governments.
The problem is that most of the EU’s competitors have not introduced such a scheme, and, as a result, European goods have increased in price, making them less competitive in world markets. Additionally, it has forced up the price of energy for consumers.
Numerous attempts to force all countries to adopt such schemes — through the UN’s Intergovernmental Panel on Climate Change (IPCC), the Kyoto Protocol and the various Earth Summits — have all failed for a variety of reasons, leaving the Europeans with a costly and ultimately futile experiment in price-fixing.
There is growing disenchantment with the scheme in Europe, particularly in Germany which has traditionally been a driver of such policies.
Dr Philipp Rösler, a South Vietnamese-born
German politician, is federal Minister of
Economics and Technology and Vice-Chancellor
of Germany. He is Chairman of the liberal
Free Democratic Party and the first
Asian-born Cabinet minister in Germany.
Most members of the largest party in the European Parliament, the centre-right European People’s Party, voted against the plan, and Germany’s Minister of Economics and Technology, Dr Philipp Rösler, welcomed the rejection as an “excellent signal” for continuing economic recovery.
This is the third time since the European ETS was established in 2005 that the scheme has come close to collapse. The first was in 2007, when it was discovered that free permits issued to major energy-users exceeded actual emissions; and the second was in January 2009, as a result of the collapse in production at the height of the global financial crisis.
However, the current price for carbon permits is less than half the lowest level reached in 2009.
There are other factors at work, as well. The European ETS is designed to cut carbon dioxide emissions as part of the UN’s plan to tackle global warming. However, there is growing scepticism about the claimed link between CO2 and global temperatures.
The problem is that, despite steadily rising CO2 levels in the atmosphere and hysterical claims of global warming, it is universally accepted that average global temperatures have not risen over the past 15 years. Additionally, Western Europe and North America have experienced several years of extremely cold winters, contradicting claims that the earth is warming.
For example, average temperatures in England in March were just 2.6ºC, which was nearly 4ºC below average, and April temperatures in some places reached their lowest levels for 100 years.
Claims by the UK Met Office, which strongly supports global warming theory, that the freezing temperatures were caused by increased melting of Arctic sea ice are simply not believable.
The London Economist which has long supported the ETS said: “Europe’s flagship environmental policy has just been holed below the water line. On April 16th the European Parliament voted by 334 to 315 to reject proposals which (its supporters claimed) were needed to save the emissions-trading system (ETS) from collapse. Carbon prices promptly fell 40%.
“Some environmentalists fear that the whole edifice of European climate policy could start to crumble. The real question now is whether the scuppering of the ETS will lead to the dismantling of the EU’s climate policies more generally.”
Benny Peiser, director of the Global Warming Policy Foundation, said, “Given the manifest reluctance of the world’s big emitters to accept any legally binding carbon targets and in face of our deepening economic crisis, Europe should undertake a comprehensive review of its economically damaging carbon targets and — in the absence of an international agreement — should consider the suspension of all unilateral climate policies that threaten Europe’s economic recovery.”
The collapse of the European ETS will strengthen the hand of Tony Abbott in Australia, who has promised to abolish the carbon tax if elected to office this September.
Mr Abbott’s principled opposition to the tax — maintained in the face of fierce attacks by the government, sections of the media and the Greens — is not only being vindicated as good economic policy, but shows a degree of statesmanship rarely seen in a politician.