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”.

Advertising

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

The world wide web is 30. Here are 8 things you should know about it

Clean air is good for business

Here’s how we get businesses to harmonize on climate change

How can newspapers survive? By measuring their social impact

FROM THE FIELD: Heeding the call for women’s rights around the planet

Early signs of growth in Eurozone?

Peru should help more young vulnerable people into work

Europe turns out more jobs this summer

Governments must take further action to boost job opportunities at an older age

As Syria conflict enters ninth year, humanitarian crisis ‘far from over’, Security Council hears

Top UN officials strongly condemn ‘horrible terrorist act’ in Nairobi

Eurozone cannot endure any longer youth marginalisation

A safer, more dignified journey for all migrants, tops agenda at global conference in Marrakech

From the boardroom to the consulting room: pharma’s role in curing gender bias

The European Parliament x-rays the troika’s doings

Summer 2018 Interim Economic Forecast: Resilient Growth amid increased uncertainty

5 things you might not know about Leonardo da Vinci

Eurozone: How safe are our deposits? Which banks will survive?

What we’ve learned about mental health from young people

EU budget: Will Germany alone manage Britain’s gap?

The new assembly lines: Why AI needs low-skilled workers too

UN human rights office urges Egypt to immediately release detained protestors

How scientists are turning living cells into the tiny factories of the future

Rule of Law: European Commission refers Poland to the Court of Justice to protect judges from political control

Brazilian officer a ‘stellar example’ of why more women are needed in UN peacekeeping

Japanese banks to move their European HQ from London to Frankfurt after Brexit

Medical students of today, technological doctors of tomorrow

EU-US Trade: European Commission endorses rebalancing duties on US products

Revolutionary technologies will drive African prosperity – this is why

Blockchain will make sure green pledges aren’t just greenwash: a new initiative by young leaders at the World Economic Forum

UN food agency begins ‘last resort’ partial withdrawal of aid to opposition-held Yemeni capital

Parliament seals 2014 EU budget and the spending ceiling until 2020

Universal Health Coverage in the EU: Are we really leaving no one behind?

IMF: How can Eurozone avoid stagnation

What is carbon offsetting?

Terrorist content online: MEPs agree to start negotiations with EU countries

‘Three-country crisis’ across central Sahel puts whole generation at risk, warns UN food agency

Chernobyl nuclear disaster-affected areas spring to life, 33 years on

Stop illegal trade in cats and dogs, says European Parliament

Your smartphone may know more about your mental health than you

The World Health Organization has called on countries to ‘test, test, test’ for coronavirus – this is why

10 months were not enough for the EU to save the environment but 2 days are

Vote at 16 in Malta: next stop Europe

G20 LIVE: “International communities and leaders have great expectations for 2016 G20 summit in Hangzhou China”, Mr Wang Xiaolong, the Chinese Foreign Ministry’s special envoy stresses live from G20 in Antalya Turkey

Tackling terrorism: MEPs approve tighter rules on homemade explosives

Voice tech and the question of trust

Rural women a ‘powerful force’ for global climate action: UN Secretary-General

COP21 Business update: Companies urge now for carbon pricing as coal is still a big issue

The Juncker Plan at work: bringing investment back on track in Europe

Brussels wins game and match in Ukraine no matter the electoral results

In Chad, top UN officials say humanitarian response must go ‘hand in hand’ with longer-term recovery

Dangers of poor quality health care revealed ‘in all countries’: WHO report

EU imposes provisional anti-dumping tariffs on Chinese solar panels

Future EU-UK Partnership: European Commission receives mandate to begin negotiations with the UK

MEPs call for decisive action to fight inequalities in the EU

Do men and women really have different leadership styles?

The EU condemns Faroe Islands and Iceland to poverty

The West unites against Mali desert rebels

These are the countries that have made their climate commitments law

From Hangzhou to Rwanda: how Jack Ma brought Chinese e-commerce to Africa

More Stings?

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