Central Europe Activ

I think it is a legitimate political question if we should curb economic activities in order to decrease carbon emission or not. But I see no reason to let the EU ETS going on: the quota trading system based on the Kyoto-protocol does not work. It is costly, unjust, and it just does not get emissions right. According to the EU’s own estimate, carbon-dioxide emission is actually growing in the Union.

The current Kyoto system has a number of pitfalls besides that it is not working: it does not include such major emitters like the US and Russia. It has a perverted side-effect: it actually gives financial benefits for China which has taken over the US as the largest emitter on Earth.

It may be the case that carbon-dioxide is not that dangerous at all. But if it is than it should be alarming that the US presidential candidates have became willing to adopt the European system which actually lets emissions increase. I believe that even if it is not proven with utmost certainty that the level of changes we cause in the composition of atmospheric gases is posing a threat to humanity, it is too likely to remain inactive. I think Rhein is right that political leadership is needed, but I think it would cause great economic and environmental risk if the EU would be pushing its current system to the G8 countries or the United nations. Real leadership has the strength to change course. It is time to give up the Kyoto protocol and look for an enforceable alternative.

Carbon tax, anyone?

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  1. Antal is right. The present experimental EU emission trading system is far from perfect. For two reasons: emission quotas have been granted amply,in a rather disparate fashion by member states; they are free of charge.
    The new proposals under discussion in Council and Parliament address these two shortcomings. All utilities and energy-intensive companies like steel or fertiliser will have to reduce their emissions by a fixed percentage of around 2 percent annually between 2013 and 2020, wherever in the EU they may be situated. For utilities emission quotas will no longer be of charge, they will be auctioned in the EU wide-emission trading system (ETS). The EU will decide in 2011 whether to subject energy intensive industries to these rules, depending on the outcome of the new international climate agreement to be finalised end of 2009.
    This new regime, which will cover about half of EU C02-emissions,leaves emitters with the choice of changing their technology or buying emission rights in the market. It will therefore be a much more powerful tool, provided market prices for C02 will rise beyond present low levels.

    The future EU provisions will contain two more vital innovations. First, mandatory car emission standards are likely to make the Europan automobile fleet roughly a 25 percent more energy efficient by 2020. Second, member states will have to cover 20 percent of their energy consumption from renewable sources, latest by 2020.

    A carbon tax may be a fine instrument, provided its rates are high enough; but it does not fit the EU because any tax measures require unanimity of all 27 member states. Good luck for obtaining it!

    Whatever the EU climate policy instruments, there is no question for the EU “imposing” its formula to other countries. Every government will have to design the most appropriate policy instruments, according to its particular situation.

    In any event, emission trading is not a panacea! What matters are mandatory rules for reducing emissions. The trading facility is no more than a sweetener.

    Let us keep our fingers crossed next week, when the US Senate will vote on a very ambitious climate bill.

    Eberhard Rhein

  2. Mr Rhein, I think I could agree in all detail with you, but not on the whole thing regarding the trading scheme. I grew up in a planned economy with quotas, and I saw that it never worked and always gave rise to a shadow (black) market. The EU trading system is very complicated, easy to manipulate, and I am afraid that all the mistakes will be corrected but the whole system will not deliver after 2011.

    I think taxation is a more direct form of motivation than a virtual market. I know that it is extremely difficult to achieve the approval of 27 member states for a tax, and it would be even more difficult to put it through the WTO system to make it compatible with world trade and other tax and tariff systems. But I am not sure that it is more difficult than to have achieve a workable United Nations resolution on climate change at all.

    You are calling, rightly, for political leadership in this field. To achieve the approval of 27 member states is extremely difficult and requires political leadership. But I think if the EU cannot come up with a good solution on which all of the Member States agree, it will very difficult to reach an agreement on the global scale: UN decision making is even more difficult and it is much more prone to corruption.

    What I totally agree with is mandatory rules for reducing emissions. However, such rules may apply for member states, but emission is caused by individuals and institutions, corporations. So the enforcement of such rules requires some relatively cheap enforcement: I think taxation is much better than the sale, allocation and trading of quotas.

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