The Emissions Trading Scheme (or Cap and Trade) will never work

Civil servants administer the policies of politicians. They break the policies down into what they regard to be a correct series of tasks and then work through the tasks, ticking boxes from their task check list. This way they   achieve their objective through a series of small tasks and the series of tasks are a path that must be followed. If the path is faulty the policy fails.

This is not a genuine step by step approach, as once the check boxes are written the pathway is written in stone. There is no going back to use a better path to achieve the objective once the path is chosen.

The European Union’s Emission Trading Scheme is a good example of a path written in stone which however foolish it has proven, nevertheless must apparently be followed. The path of the ETS is to reduce carbon emissions but has so far reduced none. I shall explain.

The ETS gives quotas for carbon dioxide emissions for each member state. That is the first box. Each state sets its own quota. These quotas have been very generous for several years – so generous that the quotas have been a profit centre for most of the generating industries affected by the ETS, rather than a system of controlling emissions. Having ticked the “quota” box because it is written in stone the civil servants can then move on to another step, also written in stone. No one seems to look up from the path to see if it is getting us to the right place.

Emission quotas have been have been deliberately set to be generous because the politicians were persuaded by those subject to quotas that we need a settling down period for the ETS to deliver carbon reductions. The theory is that after settling down the quotas could be ratcheted down thereby making emissions expensive to produce. However the starting point was to give the large energy producers free money as a bribe to work with the ETS, an easy box to tick.

Everyone wants free money and most energy generators and heavy industries want free money for themselves even more than they want a carbon free planet for everyone.

The European Union, charged with policing the ETS, found that Poland and Estonia had set too generous emission quotas, exceeding even the basic generosity that has tainted the ETS. The Commission ordered Poland and Estonia to reduce their quotas significantly Poland and Estonia appealed to the European Court, which upheld the right of each member state to set its own quota.

The European Union sought to argue that Poland and Estonia had fiddled the figures; they lost the argument with the court ruling that it was for the states to discover the figures. The European Union will appeal.  Five other nation of the European Union are challenging their allocated carbon allowances on the grounds that they are not generous enough and that the methodology or figures are wrong.

With every nation being able to choose its own emission amounts (I hesitate to say fiddle the figures), there is absolute uncertainty as to the price of the poison, sorry, carbon, which we permit businesses to emit through the ETS. This is basic; the last thing that a market established to restrict a poison needs is uncertainty as to the price of being permitted to emit the poison, even to the extent as to whether it has any price at all. In these circumstances no long term carbon reduction policies can be made by the emitting industries in these circumstances. What a mess! What a farce.

The ETS has been given priority (in terms of massive government resources and money) at the expense of clean microgeneration. All the ETS has so far achieved is free money for polluters, but the box ticking blinds the civil servants and the policy makers to the ineffectiveness of the scheme. The path is written in stone, after all.

The Europeans thought that if they could create an effect emissions trading program, the United States would join in the ETS and then would all the other nations of the world. Thus, it was expected that the ETS would be a way of saving the world from excessive carbon emissions. I always thought that the ETs was more like the complicated derivatives that have infected banking, rewarding speculation rather than compelling emission reduction. It is a bit like trying to reduce crime through market mechanisms, rather than laws.

In the USA many environmentalists support emission trading as a concept but some politicians oppose it. Most persuasive are those who argue that emissions trading favours those industries that can afford to lobby politicians heavily get the best permits.

After several years emissions trading is still said to be “settling down”. That is nonsense. It will never settle down to do its job. It is a fundamentally flawed concept.

Humans are in a hole of their own making with climate change and have shown little inclination to stop digging. When it comes to emissions trading they have chose a path that they imagine will lead them out of the hole (while continuing their digging), but it is clear we have to stop digging. Then we must look up and choose another path to reduce emissions.

The path that will lead us out of our hole is compulsion. If we had devoted the energy and resources that are being spent on the ETS to compulsory measures, especially small scale clean renewable energy, we would be on a path that leads us all out of the hole.

3 Responses

  1. Here, here,

    the answer my friend is not blowing in the wind, our future power and enough of it shines on the earth every day somewhere always and could supply the whole planets electricity over 21 thousand times each and every day, yet we let it come and go.

    Genersys Plc have the right idea for our green power,

    I do not work for these guys by the way, but do support all kinds of this technology, free energy rocks my boat.

  2. […] recent history, in which Democrats have erased the GOP’s long-standing fundraising advantage. The Emissions Trading Scheme (or Cap and Trade) will never work – 09/25/2009 Civil servants administer the policies of politicians. […]

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