Thursday, August 09, 2007

Stalking horse

In a foreward to Europe’s Dirty Secret: Why the EU Emissions Trading Scheme isn’t working by Open Europe Max Andersson, a Green Party Member of the Swedish Parliament, the paper argues that
far from creating a credible basis for EU level action on climate change, the ETS has instead established a web of politically powerful vested interest groups, massive economic distortions and covert industrial subsidies... action (whether through the EU or on a larger scale) should focus on setting tough and enforecable national targets for greenhouse gas reduction, but should leave decisions on how to reach those binding targets to individual countries. This would give national governments the flexibility to explore alternatives to emissions trading - most notably green taxes as part of their strategy for combating climate change.
Some criticisms of the shortcomings of the ETS are well taken (and have been previously highlighted elsewhere -- see, for example, ETS 'scandal'). The case for carbon taxes and (hence) a more predictable future price for carbon is gaining increasing support.

But there is at least one flaw in Open Europe's argument. Namely, "politically powerful vested interest groups, massive economic distortions and covert industrial subsidies" are as likely to manipulate national jurisdictions as supranational ones such as the EU. Clearly this is something they have been able to do in the past.

A trading system such as the ETS needs reform (including of the amount of credit that can be purchased outside Europe) rather than abolition. Perhaps that reform can come in combination with carbon taxes as one of the first steps in a long journey from 2008. The key issues is political will.

[P.S. 10 August. A friend writes: "the ETS [is] in trouble as phase one didn't change behaviour much; much will hinge on phase II but I think the data systems are up now so the Commission should be able to set [National Allocation Plans] much more accurately which was the main problem which allowed 'politics' to overwhelm things."]

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