Emissions from the burning of fossil fuels are thought to be responsible for the elevated levels of atmospheric carbon dioxide that are thought to be driving global warming. The Kyoto Protocol has been considered an important first step in reducing emissions with European nations agreeing to cap emissions under a trading scheme.
Here’s how it was explained before the market was launched:
“The Kyoto Protocol established clear targets for reducing the greenhouse gases that are to blame for global warming, and flexible and market-based instruments with which to achieve these objectives.
An effective emissions trading system can be a key tool for dealing with climate change. From January 2005, the European Union hopes to have in place the world’s biggest and most effective emissions trading scheme, covering over 12,000 energy-producing and energy-intensive plants across the EU. The scheme will offer businesses a cost-effective way of both reducing their emissions and covering the bill for action to help prevent climate change.
How does emissions trading work? Basically, each Member State agrees a national allocation plan (NAP) setting out the total amount of CO2 its operators can produce. Each plan should be based on a national commitment to reduce emissions in line with the Kyoto agreement. Companies then have the right to trade their allowances either directly with each other or via a broker, bank or other intermediary. Over time, emissions trading exchanges are expected to develop.
… Of course, the scheme’s effectiveness in cutting greenhouse gas emissions depends on the level of trust participants place in it. “
It seems the British were one of the few honest nations, at least they are not now being accused of underestimating their emissions.
The price of carbon was in free fall some weeks ago when it became apparent that many European nations had overestimated their emissions. At least an initial overestimation, rather than a big saving, is the reason now claimed for the surplus of carbon credits which has resulted in a halving of the price of carbon on the new market in just over two weeks, click here for my previous blog post.
Today was the day the European Union was expected to announce the overall difference between emissions and “emissions” and according to Reuters:
“EU emissions of heat-trapping carbon dioxide in 2005 were 44 million tonnes below a quota of 1.829 billion tonnes under the European Union’s carbon trading scheme …
The figures confirmed a Reuters report on Friday that most EU members undershot their limits for greenhouse gas emissions, suggesting the bloc had been far too generous in handing out permits to pollute.
Top polluter Germany moved swiftly to say it would make retroactive cuts to its 2005 allocation of allowances to emit carbon dioxide after European Union figures showed a 21 million tonne — or four percent — German undershoot.”
British companies say they will sue.
According to The Guardian:
“While CO2 emissions in Germany, the EU’s biggest polluter, fell 25.5m tonnes short of levels allowed under the ETS, Britain’s were 31.3m tonnes above its allowances in 2005, the first full year of its operation. Overall EU emissions were 59.2m tonnes short.
[And I thought someone might consider this good news.]
The five UK companies suing the commission at Europe’s second highest court, the court of first instance (CFI), the Guardian has learned, are RWE npower, Scottish Power, Scottish & Southern Energy, International Power and Drax, owner and operator of Europe’s biggest coal-fired plant in north Yorkshire. They are demanding the reinstatement of 20m tonnes of extra emissions rejected by Brussels. Their action, which has come after the government dropped its own legal proceedings against the commission, is expected to be followed later this year by renewed court action between Britain and Brussels because Whitehall is refusing to meet the June 30 deadline imposed by the ETS for submitting its national allocation plan (NAP) for CO2 permits for the period 2008-2012 and has offered the end of the year instead.
… It is understood that the five want the court to uphold the principle of “the accurate baseline” – or allowing governments that submit provisional estimates of emissions to revise these in the light of fresh evidence. Their group also argues that the commission’s reasons for rejecting the UK’s amended NAP had already been rejected by the court.”
So it seems the success of an artificial trading system is dependent on everyone being more British?
Jennifer Marohasy BSc PhD is a critical thinker with expertise in the scientific method.
The EU has a great deal of experience manipulating grain and oilseed markets using misinformation, so it shouldn’t surprise anyone that they’ve apparently done the same with carbon futures.
The alice-in-wonderland world of the EU is guided by collective ideals which produce such wonderful documents such as this pearler;
OPINION of the European Economic and Social Committee on The effects of international agreements to reduce greenhouse gas emissions on the industrial change processes in Europe
4.1 Climate change is a unique problem that humanity has never before encountered in modern times. The problem is global, long-term (even a few centuries) and involves complex interactions between climatic, environmental, economic, political, institutional, social and technological processes.
4.10 The global community must be involved in solving global problems by political means. It has to be openly admitted, however, that such involvement is not necessarily in the interest of all the big polluters and that, because of their size and geographical location (USA, China), they prefer a unilateral approach.
4.11 These problems cannot be solved without a far better understanding of both the causes of the phenomenon and the possibilities of reducing the man-made influences involved. Only adequate investment in science and research, monitoring and systematic observation will enable the necessary acceleration in scientific understanding of the real causes of climate change.
4.14 All measures must be adopted only after thorough analysis of the implications and consequences, so that inappropriate steps should not endanger the competitiveness and the very ability to act of the EU as a whole and of the individual Member States. Support for energy from biomass, for example, must not be a threat to some branches of industry by destroying their sources of raw materials, and an increased energy price as a result of measures to suppress greenhouse gas emissions cannot become prohibitive and have a significant social fallout.
Bottom line – its all about trade!
http://eescopinions.esc.eu.int/EESCopinionDocument.aspx?identifier=ces\ccmi\ccmi024\ces593-2006_ac.doc&language=EN
You could say that they are admitting that the carbon trading scheme is a stuff up
3.2.2 In view of the fact that not all countries have set taxation of primary energy sources at the same level and the Member States have very different internal conditions, this measure will bring about industrial change by causing an imbalance which might influence the allocation of investment into developing capacities and new technologies in branches of industry heavily dependent on energy. This instrument should be used as the last resort and with the utmost caution, especially because the taxing of primar y energies in Europe puts those countries where taxation has been introduced at a competitive disadvantage.
3.2.3 The introduction of the European system of emission allowances trading (EU ETS) involves a rise in energy prices (the range is between 8% and 40%, depending on source and area) and a loss of competitiveness manifesting itself in a drop in GDP of between 0.35% and 0.82%. Also expected are a drop in the European economy’s export performance and tougher competition with countries which, unencumbered by measures to reduce climate change, have low energy costs. The way the system is being introduced is very chaotic and is causing uncertainty in the investment environment as a whole, while favouring only those with inefficient processes and management systems.
Alice in Wonderland? Absolutely not! We are talking about real-life enhancement for many interest groups. I am a member of International Association for Energy Economics. The latest issue of “The Energy Journal” came yesterday It was a 284-page special issue entitled “Endogenous technological change and the economics of atmospheric stabilisation”. The Kyoto Protocol is academic heaven. I am off to IAEE’s 29th annual congress in Potsdam (6-10 June) Dr Pachauri of IPCC will be a plenary-session speaker. Naively, I thought my paper would fit in among the over 400 papers to be given in concurrent sessions – but it wasn’t accepted. All I wanted to say is that IPCC has its energy economics wrong and hence also its projections of future warming. I also said it doesn’t matter because the Sun drives our ever-changing climate – not people. Don’t write off the greenhouse scare just yet.
Not a bad summary from the BBC: http://news.bbc.co.uk/2/hi/business/4771871.stm
Filing this comment about France: Europe’s system for trading pollution permits – hailed as a global model for
cutting greenhouse gas emissions – was thrown into turmoil on Monday night
after at least two member states proposed substantial and conflicting changes
to the way it operates. Germany responded by announcing that it would recall
about 12m excess permits, driving carbon emission prices to a three-week high
in heavy trading. But France said firms should be allowed to hold over unused
permits. On Monday Brussels said any adjustment to the current allocation of
permits was not allowed under the scheme.
–Fiona Harvey, Financial Times, 15 May 2006
Thanks Benny.
Hmm it definitely doesn’t sound good from a scheme management point of view, although it is good that emissions are lower than previously thought.
Still, lets not indulge in too much doomsdaying about the success/failure of the EU emissions trading market just yet.
the EU emissions trading scheme is a huge effort, a new effort, and teething problems are to be expected. Perhaps this can be characterised as teething problems.
Or,
Comparing the first few years of emissions trading to other big artificial markets like, say,
the deregulated NZ electricity market
the deregulated californian electricity market
the Australian deregulated telecommunications market
the international oil market
etc
it isn’t looking so terrible after all. Its looking positively normal.
Perhaps the doomsday cries of ‘stuff up’ and ‘turmoil’ etc are blind to the fact that this kind of gaming and disagreement is part and parcel of any big market, and typical of the kind of hurly burly that drives creativity and innovation etc.
You free marketeering sorts thrive on this kind of amorphous argy bargy in the marketplace, don’t you?
Or do you want stricter regulation of the emissions trading market and its operation?
Steve,
It’s not exactly “free marketeering” when it’s open to such blatant manipulation. Strict regulations are required to ensure that supply and demand are the forces that move the market.
Manipulation of a market is corruption of the right to trade freely.
But isn’t one person’s ‘manipulation’ another persons ‘acting within the rules as they have been set to achieve maximum possible advantage’?