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Argument: Europe's cap-and-trade system has encountered major problems

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 +==Parent debate(s)==
 +*[[Debate:Carbon Emissions, Cap-and-trade versus Carbon Tax]]
 +
==Supporting evidence and analysis:== ==Supporting evidence and analysis:==

Revision as of 11:31, 2 October 2007

Parent debate(s)

Supporting evidence and analysis:

The Economist, "Emissions Trading", 6/18/06 (subscription only) - "Designed to discourage the production of greenhouse gases and encourage investment in cleaner forms of energy, it has rewarded polluters rather than penalising them, and failed to boost alternatives...The ETS was set up in 2005 to cover five industries, and 13,000 factories and plants, rated as particularly dirty. They were given tradeable allowances covering their existing emissions; firms wanting to exceed those levels had to buy permission, either by purchasing allowances from other firms, or by buying permits from developing-country companies…. Three problems have emerged."

"...The first is the consequence of handing allowances free to existing polluters (a process known as “grandfathering”). The polluters pocketed them, passing on the extra cost of production to their consumers. Moreover, once trading took off, the price of allowances rocketed to €30 ($40) a tonne. Developing countries, meanwhile, were selling permits for about half that (because they cannot yet be traded, and are regarded as riskier). So polluters have been cashing in their allowances, buying cheap CDM permits—and keeping the difference. According to a report by IPA Energy Consulting, Britain’s power companies alone have profited to the tune of around £800m ($1.5 billion) a year."
"...The second problem was that when the scheme started there was little information about how much pollution the 13,000 factories were emitting. The original levels claimed by member governments were not much more than guesswork, and not surprisingly were generous. Now that levels are being monitored, it turns out that Europe is not emitting as much as it thought it was. When this emerged last month, the price of carbon allowances crashed."
"...Third, the current phase of the ETS lasts for only three years. Nobody knows what level of allowances will then be set. Since the payback period for cleaner power-generating technology is at least five years, there is no incentive for producers to invest in cleaner technologies."

Articles making this case:

Organizations making this case:

  • Open Europe - "[They] say the system is too flawed and should be abandoned. They argue that member states are not making equal sacrifices, with the UK punishing its own industry with tough emission reduction targets. The imbalance has cost the affected UK firms £470,000,000 in total in 2005, they claim."[1]
    • They have also called it an example of "botched central planning".[2]

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