A few years back, Europe’s cap-and-trade system, called the ETS, was taking a beating in the press. Some of the criticism was legit: the program really did make some silly missteps in the early years.
The biggest bungles were tied up with how the ETS handed out emissions permits. First, they decided to give them out for free—which, as Sightline has discussed ad nauseum, was a recipe for windfall profits for the firms that got free permits. And second, for lack of reliable emissions data, the ETS handed out more permits than firms actually needed. Ultimately, the glut of permits led to a collapse in the price of carbon, and very little progress in reducing emissions.
But the good thing about making a mistake is that you can learn from it. And that’s just what the ETS has done. To fix the windfall problem, nations participating in the ETS have begun auctioning off permits rather than handing them out for free. And now, there’s evidence that the ETS has really begun to reduce emissions. The New York Times reports:
In a boost for the system ... a prominent research company, New Carbon Finance, said its calculations
showed that the largest cause of a reduction in emissions in the
European Union last year was attributable to the trading system—
because it had encouraged greater use of gas in power generation rather
than dirtier fuels like coal.
European emissions dropped by roughly 3 percent in 2008.
So it took a little while, but Europe’s cap and trade system is having the intended effect: by putting a price on carbon emissions, it’s made a meaningful dent in climate-disrupting pollution.
This post originally appeared at Sightline’s Daily Score blog.
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Comments
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Ken Johnson Posted 5:04 pm
21 Feb 2009
An efficient and rational system would motivate emission reductions without undermining future reduction goals.
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hapa Posted 6:54 pm
21 Feb 2009
also i guess there must be non-idiots who argue that cap-and-trade doesn't work at all, under any conditions, but i've never met them.
so, what does it mean that "cap and trade works"? does it mean, "carbon pollution goes down when you have a carbon price"? duh.
does it mean, "carbon pollution goes down to zero and beyond as fast as you need it to"? that's not proved here.
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waves16 Posted 12:34 am
22 Feb 2009
Cap & trade does not encourage the industry to exceed standards. A market-based approach as proposed in Henderson's recent book would create a continuing incentive for companies to do better year after year and exceed the standards. The earth would continuously improve, and the whole thing would be driven by industry and profitable for companies. Cap and trade is also a lot more cumbersome to handle and less efficient than Henderson's strategy.
Tags: climate change solutions, carbon emissions cap & trade strategies
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amazingdrx Posted 1:35 am
22 Feb 2009
Natural gas or coal emits roughly the same GHG per kwh, mainly CO2. The other emissions are reduced, it's true. But carbon CnT is meant to reduce GHG not the other coal pollutants, a much touted CnT system for those operates separately and is often used as a supporting example for carbon CnT.
The problems with the ETS system is not from years back, it is happening right now. Hedge funds are cashing in and renewable energy projects are being cancelled because of it.
That source you cite? "New Carbon Finance". From wiki:
"Carbon finance is a new branch of Environmental finance. Carbon finance explores the financial implications of living in a carbon-constrained world, a world in which emissions of carbon dioxide and other greenhouse gases (GHGs) carry a price. Financial risks and opportunities impact corporate balance sheets, and market-based instruments are capable of transferring environmental risk and achieving environmental objectives.
The operative phrase "market-based instruments" is exactly what hedge funds and investment banks used to destroy world wide credit markets. So on the word of a research firm funded and dedicated to hedge fund thievery via "free" market trading of our atmosphere, we are supposed to go ahead and put our climate in the hands of CnT?
Not very convincing. Trusting "free" market economists, the priesthood of reagan revolution industry self (no) regulation? That is not an idea that recent history would endorse.
Hedge funds need to be regulated out of existence.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Komanoff Posted 1:46 am
22 Feb 2009
U.S. CO2 emissions almost certainly fell too in 2008 vs. 2007. I rough-estimate a 2% drop -- without carbon trading, of course. (Go to the spreadsheet's "Emissions" tab; I daresay our 2% drop would have been even greater if our growth in wind power's share of electricity had matched Europe's.) Caution: Recession at Work.
And can we ditch the notion that a "lack of reliable emissions data" led the ETS to hand out too many permits? As the NY Times reported last Dec. 11, it was naked corporate power, pure and simple -- the same power that, we can be certain, will cause a cap-and-trade regime here to be larded with giveaways and take years and years to get off the ground.
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amazingdrx Posted 2:09 am
22 Feb 2009
That's the reasoning behind hedge fund vulnerable CnT?
Not only should hedge funds be regulated out of existence, every asset of every participant in this global criminal conspiracy needs to be confiscated to help make real people devestated by this crisis whole again.
Some have suggested that Nuremburg-like trials for those responsible would be going too far. Ask a family badgered out of their home after losing their jobs due to this financial crime wave related recession about that.
Would the victims opt to confiscate the assets, and forget the trials, and just put the crooks away indefinitely, as the alleged terrorists, mainly cab drivers and goat herders, at gitmo and the other secret prisons are?
The "free" market trading crowd doesn't believe in the constitution or habeus corpus, that is evident by widespread wing nut corporatist support for the bush regime's kidnapping, torture, and mass murder. Do they deserve the rights they deny others?
It's a good thing for us all that the constitution is coming back into political fashion, but it's especially helpful for the Madoff set. Bernie gets to live in his luxury home awaiting trial? I guess constitutional rights are still in effect if you steal 50 billion, even if you send out hundreds of millions in the mail to cronies for later recovery.
Try to get out on bail if you are accused of stealing 5000 bucks though. That would be a challenge.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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GreyFlcn Posted 2:16 am
22 Feb 2009
American Revolution?
Deficit Spending
World War I?
Deficit Spending
World War II?
Deficit Spending
Great Depression?
Deficit Spending
Moon Launch?
Deficit Spending
Iraq War?
Deficit Spending
Pretty much any war?
Deficit Spending
Bank Bailout?
Deficit Spending
If this is at all serious, then we should seriously consider deficit spending.
And it's not terribly bizarre that if we're helping future generations, that future generations help pay for it.
-David Ahlport
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GreyFlcn Posted 2:26 am
22 Feb 2009
Conveniently ignoring the gigantic economic collapse, and then claiming crediting the beneficial aspects.
-David Ahlport
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amazingdrx Posted 2:43 am
22 Feb 2009
Notice now that progressive forces are in power to clean up the mess deregulation created, just as with FDR's administration, the corporate right suddenly become budget conscious again. After their favorite administration built the debt to record levels.
The big scare tactic from the right is default. They warn of panic as everyone goes to gold for protection from the end of the world. What do they cite? Why the 800 trilliopn in "derivatives" of course. As if those "instruments" are printed by the US mint?
That is bad paper, not US dollars. The crooks defrauded investors all over the world. Was that our fault? Taxpayers and customers of local and regional banks that didn't engage in this crime?
The treasury will print more dollars and it should, very carefully as needed. That is the ultimate safety valve preventing default. More money supply or less is put into the system depending on informed gressing by the fed. The real economy then smooths out that effect over time.
We need reinflation now, then as inflation starts up it needs to be reeled in by savings and real investment. In this reagan revolution industry self (no) regulation era, casino capitalism consisting of hedge funds fixing markets with insider trading has substituted for actual investment dollars going into building actual companies that make real profits and provide real jobs.
It's roulette odds for indivuals with retirement accounts and family homes as investments. With the hedge funds controlling the roulette wheel.
We want real free markets with at least poker odds. Where we can do ok over time by hiring prudent wise investment managers like Warren Buffet.
We need all buffets and no hedge fundies allowed in our trading institutions. Make the hedge fund crooks operate as liscence plate stampers, used car dealers and lawyers, where their ethics are compatable with their job and reputation.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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SallyVCrockett Posted 12:29 am
23 Feb 2009
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amazingdrx Posted 1:50 am
23 Feb 2009
By diverting those resouces we could raise the price of carbon energy and fertilizer and lower the price of its alternatives by subsidizing renewable energy and organic ag.
A way to price carbon relative to its renewable/organic alternatives. Without "new taxes" or the danger of hedge fund "free" market unregulated mega-thievery.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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F James Handley Posted 3:43 am
23 Feb 2009
Cap/trade hasn't reduced emissions in the EU and will probably have to be scrapped at tremedous cost.
News Flash: EPA attorneys explain why explicit fees as sucessfully used to phase out ozone-destroying CFCs would work to reduce greenhouse gas emissions. See http://www.carbontax.org
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GreyFlcn Posted 8:16 am
23 Feb 2009
You're confusing methods for goals.
And that's the wrong way to go about thinking.
What we need is to:
Get off coal and eventually natural gas electricity
Get off oil for transportation
Stop destroying biological carbon sinks
And I'm seriously starting to question whether taxes (or equivalent) is the most effective way to do this.
Especially when it starts to get extremely complicated, and is enforced by politicians who are unwilling to inflict pain.
I'm starting to think the more effective way is to
Step 1. Build alternatives via deficit spending
Step 2. Scale them up
Step 3. Simply have the Fed start buying up old cars, and old power plants via buybacks, or perhaps even eminent domain.
_
Markets are specifically built to solve short term problems. But a "market" approach just doesn't cut it if you're trying to solve a long range problem.
That's why we have government. To do what the market can't do by itself.
(Kind of like how our brain has both long term and short term memory. We couldn't function right without both of them.)
-David Ahlport
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GreyFlcn Posted 8:27 am
23 Feb 2009
I'd also say that prohibitive regulations are rather effective.
For instance the 2005 Clean Air Act's restrictions of mercury, and sulfur pollution are far more prohibitive to building new coal plants, than carbon pricing would ever be.
One could go further and just say that "Hey you want a new coal plant? SURE! But you can't build it unless it's going to be CarbonCaptureSequestration."
Which would have the effect of doubling or quadrupling the cost of the plant.
Furthermore, with offsets, you'd STILL have the coal plant. They'd just plant a couple trees and have us "trust" them that those offsets will be legitimate for the next 40 years.
(Which ultimately even if offsets work perfectly, they do NOTHING to reduce emissions, they just maintain the status quo.
Status quo just doesn't cut it.)
-David Ahlport
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