The EU pollution rights trading system frozen

Connie Hedegaard, Member of the EC in charge of Climate Action, gave a press conference following the 2011 compliance round-up on emissions trading. (EC Audiovisual Services)

Connie Hedegaard, Member of the EC in charge of Climate Action, gave a press conference following the 2011 compliance round-up on emissions trading. (EC Audiovisual Services)

The recent collapse of the European Union emissions trading system (EU-ETS) revealed the flimsy grounds on which the EU has built its policy against the climate change. The idea was to make polluting expensive but not much so. How thin were the foundations of this system started to clearly emerge, when the economic crisis knocked at Eurozone’s door. The slight fall of industrial production quickly created a surplus of rights to pollute and as a result their “price” took a deep dive. Towards the winter of 2012-2013, when, theoretically, the rights to pollute should become dearer due of the additional energy needed to warm up our cold Continent, their prices collapsed.

In view of that, EU Commissioner for Climate Action, Connie Hedegaard, couldn’t stand silent and had to do something to save whatever could be saves of the EU-ETS. On 24 January 2013, she issued a memo commenting on developments in the European carbon market. At this point, it must be noted that carbon prices are tightly bonded with the price of the “rights to pollute”, because this energy source is the most polluting. If the ETS prices fall, carbon prices follow suit.

The memo said: “On a day where the carbon price at some point went below €3 it must be clear to all that when the Commission warned that the ETS price could drop dramatically it was not a false warning but a real possibility”. As if it was not the system that proved false, leaving huge margins for the polluting energy industry to play with. Another proof that the ETS was falsely conceived from the beginning is that almost all the major plans for more energy production investments are currently based on polluting fuels, mainly carbon.

What is the EU-ETS

But let’s elaborate a bit more on this EU-ETS.  This is an artificially created market of rights to pollute,  constituting the basic tool of European Union’s policy to counter climate change. At the time of its conception around 2008, it was advertised as a key for reducing industrial greenhouse gas emissions cost-effectively. It is the first – and still by far the biggest – international system for trading greenhouse gas emission allowances, the EU-ETS covers more than 11,000 power stations and industrial plants in 31 countries, as well as airlines. However, the large margins to pollute initially accorded to the EU energy industry currently destroyed the system. The slightest reduction of production, cause by the present economic crisis, led to the collapse of polluting rights prices.

Unfortunately, as every major economic plan spanning a long way into the future, the ET-ETS was based on a series of assumption which turned out to be wrong. In the heart of those assumptions was the usual error that the prevailing conditions of the past, will continue to more or less shape the future. Planners being more mathematicians than political economists, tend to commit this kind or error. This kind of model building however, suits the politicians who want to be seen as caring for the future without even paying attention to the present.

The good days

On 23 January 2008 the then Member of the European Commission, responsible for the environment, Stavros Dimas, presented this grandiose EU-ETS project to save the planet. His basic remarks were as follows:

“On current trends, climate change will almost certainly be endangering the lives of millions of people and causing serious disruption to our economies within the lifetimes of many in this room today. Europe and the rest of the world have to act fast, and act boldly, if we are to prevent this catastrophe…Today’s package underlines the European Union’s determination to continue leading global action by example. It shows our partners around the world that making the deep reductions in greenhouse gas emissions that are necessary is fully compatible with continued economic growth and prosperity…

The Emissions Trading System, which we are proposing to strengthen and expand, is essential to achieving these cuts cost-effectively. The package will also cut the European Union’s oil and gas imports, increasing our energy independence and saving billions of euros each year “.

Time of truth

Everything turned to be wrong. Europe’s dependence on imported fossil fuels increases as it does the extraction and burning of carbon. The total collapse of the EU-ETS this winter however, urged the European Parliament to intervene. The Parliamentary Environment committee backed emissions trading fixing. This simply means that the trading and the market ideology is completely abandoned and we return to the good old arbitrary rules setting by the political authorities.

In more detail, yesterday Tuesday, the European Parliaments’ Environment Committee MEPs voted a freeze of the auction of pollution allowances. In order to make this more saleable they added that this is imperative to help boost green investments. Not a word for the structural faults of a system that only helped some politicians to re-elect during the past five years.

In short the MEPs decided the following amendment of the EU-ETS, which clearly put a tomb stone to the free trading system: {“In an approved amendment tabled by the S&D, ALDE, Greens/EFA and GUE/NGL groups, MEPs say the Commission “may, in exceptional circumstances” adapt the timing of auctions, provided an impact assessment shows the sectors concerned will not face “significant risk” of companies relocating outside the EU…”The Commission shall make no more than one such adaptation”, the text adds}.

There it goes this much-advertised EU-ETS that was conceived to save the entire world from the “greenhouse effect”.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Reducing deforestation means getting serious about environmental crime

The company of the future must do well by doing good

Afghanistan: top UN official denounces ‘extreme’ suffering of civilians in Ghazni

Pandemic and mental health: what to do in this context?

This brewery is ditching plastic six-pack rings to save marine life

Tourism and transport: Commission’s guidance on how to safely resume travel and reboot Europe’s tourism in 2020 and beyond

Do we need a new Marshall Plan to rebuild Europe after COVID-19?

Our food system is no longer fit for the 21st century. Here are three ways to fix it

Music is a vital urban resource. How do we plan for it?

It’s people, not technology, that will decide the future of work

‘Growing alarm’ over Fall Armyworm advance, with cash crops ‘under attack’ across Asia

Top UN official urges Russia and Ukraine to step away from further confrontation at sea

IMF: How To Deal With Failed Banks

Somalia: UN urges steps to ensure future elections not ‘marred’ by rights abuses seen in recent polls

A sterilised EMU may lead to a break up of Eurozone

Costa Rica has doubled its tropical rainforests in just a few decades. Here’s how

Migrant caravan: UN agency helping ‘exhausted’ people home

Here are 4 tips for governing by design in the Fourth Industrial Revolution

4 ways the way we make things can change for a sustainable world

The European Parliament launches a website on European election results

10 predictions for the global economy in 2019

Migrants and refugees are being forgotten in the COVID-19 response. This has to change

UN pushes for universal health care on International Day

Not much of a help the new EU Directive on pensions

EU Budget 2019: MEPs increase funding on youth, migration and research

Amid troop build-up in Rohingya’s home state, UN appeals to Myanmar for peaceful solution

Copyright: MEPs update rules for the digital age

JADE Romania Celebrates the 4th Anniversary

2,300 migrant children in Central American ‘caravan’ need protection, UNICEF says

Statement by President Tajani on US steel and aluminium duties

The ECB accuses the politicians of inaction, continues injecting billions to banks

The eyes of Brazil and the world turn to the largest rainforest and largest biodiversity reserve on Earth #PrayForAmazonia.

COP25: Support business efforts to tackle climate change, urges Guterres

Women-Friendly Spaces for Rohingya refugees: A place for protection and care

Nine children killed or maimed in Afghanistan every day: UN Children’s Fund

Protecting whistle-blowers: new EU-wide rules approved

Charlie’s tragedy energized deeper feelings amongst Europeans; back to basics?

Skills, not job titles, are the new metric for the labour market

Direction Wakanda: finance methods to make Africa a superhero continent

‘The welfare of the Libyan people’ the UN’s sole agenda for the country, says Guterres in Tripoli

From diamonds to recycling: how blockchain can drive responsible and ethical businesses

The Parliament sets the way for the European Banking Union

Teenage girl’s death sentence spotlights Sudan’s failure to tackle forced marriage, gender-based violence – UN rights office

This heroic doctor is waging war on rape and the stigma around it

Questions & Answers on the coordination of measures restricting free movement in the European Union related to the coronavirus pandemic

How dearly will Germany pay for the Volkswagen emissions rigging scandal

Syria: UN food relief agency ‘doing everything we can’ to reach Idlib civilians

European Youth Forum and youngest MEPs call on President Juncker to keep his promise to Europe’s youth

6 ways countries can prepare for the next infectious disease pandemic

Ecofin: ‘The Friday battle’ for the banking union

Bank resolutions set to remain a national affair

The Junior Enterprise concept: Business & Education

7 ways to break the fast fashion habit – and save the planet

Coronavirus fears may have driven over 300,000 UK smokers to quit

These are the countries that eat the most meat

Commission reports on the risks of investor citizenship and residence schemes in the EU and outlines steps to address them

The health of the human being in coexistence with a transformative biosphere

Quality education an ‘essential pillar’ of a better future, says UN chief

IFMSA and IPSF on the Health of Migrants and Refugees

International community has achieved unprecedented success fighting offshore tax evasion

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s