Emissions Trading – a triumph of hope over reality

The European Union’s Emissions Trading Scheme was doomed from the start. I have always held that you cannot use the devices of the casino to reduce emissions. You can tax emissions, making them more costly to produce and creating an incentive to encourage ways of using clean renewable emissions, but to set up a system where emission producers can speculate on the price of carbon dioxide, which is a commodity that no one wants and no one can use, as a way of reducing carbon dioxide emissions, will make no difference to the amount of greenhouse gas emissions that are produced.

Apart from this rather important fundamental flaw in the concept of emissions trading, the European Union stifled any possible chance of emissions being reduced by giving the great producers of emissions huge amounts of free carbon credits. This in effect bribed the producers of emissions. They have this massive backlog of credits (free money from the European taxpayers) which keeps the price of carbon so low as to make no difference to the emission producers’ behaviour.

In order to try to make the ETS work the EU has tried to “backload” the carbon credits so that the companies that have them cannot use them. In effect the EU is trying to take back the free money it handed out, in order to make the carbon price rise and stimulate the emission producers to produce fewer emissions.
This proposal would have significantly increased the cost of energy and the cost of producing steel, aluminium and other goods in Europe. In these times the proposal was defeated, because it seems that we will not accept more hardship in order to protect our children and grandchildren from climate change.

The amount of resources that have gone into creating managing and running the ETS has been substantial. It was a waste of money, which would have been far better spent on clean emission free renewable energy, but I think that the various officials who designed and set up the ETS had a childlike belief in its efficacy.

The ETS still remains the central plank of the European Union’s plan to cut emissions. In other words, the emissions cutting policy is founded upon a device which does not work to cut emissions. It has been a triumph of hope over reality.