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The EU's Scheme

Climate Policies Must Break Free From Big Oil

by DAVID CRONIN

It seems an odd time for environment policy wonks to throw a party. The level of carbon dioxide in the earth’s atmosphere is higher than it has been in three million years, according to the National Oceanic and Atmospheric Administration in the US.

That sobering news hasn’t stopped the organisers of Carbon Expo in Barcelona from promising a celebration when the annual event is held for the tenth time at the end of this month. Ardent defenders of the polar ice caps like Shell and Statoil will spend the day gazing at mathematical models about the ideal price of pollution. After all those cerebral chinwags, they will surely have worked up an appetite for tapas and sangria.

On second thoughts, maybe it is apt for the oil industry and its chums in the world of finance to kick up the high life as the climate breaks down. For they have been dexterous enough both to cause that breakdown and to present themselves as the cure to it.

The big “green” story here in Brussels lately hasn’t been the perilous state of the planet but the problems befalling the EU’s emissions trading scheme. Although the scheme has proven to be disastrous in terms of mitigating climate change, it has helped entrench the idea that heat-trapping gases should be considered as a tradable commodity. Because there are people out there who stand to make millions from carbon transactions, it’s not surprising that they want to salvage the Union’s scheme.

The International Emissions Trading Association (IETA) is arguing that the scheme “should remain the EU’s central climate policy instrument.” In fact, it’s so gung-ho in its support for this market-based mechanism that it is advocating that similar systems should be established as a result of global talks.

Among IETA’s members are Goldman Sachs, JP Morgan, Shell, BP and Total. I seem to recall that the first two villains helped to cause a global financial crisis and that the latter three sell fossil fuels, the principal source of carbon dioxide in our skies. Are they really in a strong position to decide what should be the “central” policies on climate change?

Unfortunately, they are. The prototype of the EU’s emissions trading scheme, as it happens, was developed by BP. While he was still chairman of that firm, Peter Sutherland, was hired as an adviser on climate on energy to the European Commission’s chief José Manuel Barroso during the early stages of the scheme’s implementation. It is an “instrument” both designed by fat-cats and played with the intention of pleasing them.

The agenda for the Carbon Expo boasts a session titled “learning from the legends.” The “legends” referred to here are emissions trading and the international Clean Development Mechanism (CDM) that it supports.

Is this supposed to be a joke?

One of the most disgusting aspects of the EU’s climate change policies is that they rely largely on “offsetting.” Under this dubious concept, it is fine for power plants on this continent to belch out as much pollution as they want, provided some money is given to environmentally-friendly projects in poorer countries. This is akin to buying a nice present for your friend who has given up smoking instead of you.

Rules applying to the EU’s scheme allow for up to half of all emission “cuts” financed by it to be achieved via the CDM. Newly published data from the European Commission indicates that this form of offsetting is on the increase. In 2012, offsets accounted for one-third of the “compliance commitments” made by firms taking part in the trading scheme, compared to 13% the previous year.

Many of the projects being funded are anything but clean. A “high-level panel” overseeing the CDM – which includes a European Commission representative, as well as ministers from Japan and South Africa – published an assessment on its performance last year. The report warned that the CDM could lead to a “net increase” in global emissions of greenhouse gases. It suggested that the mechanism is being widely used to support coal-fired projects, particularly in India and China. Energy efficiency has been “almost entirely left out” of the CDM, the report added.

In a few weeks time, members of the European Parliament will decide whether or not they should endorse the continuation of the emissions trading scheme. The best thing our elected representatives could do is to bury the scheme. Trying to revive it would be irresponsible.

There is a salutary lesson here. Saving the planet requires what Americans call “big government,” not a dodgy market mechanism.

There is an urgent need to go back to the drawing board, not to tinker with a system fashioned by BP.

Fortunately, there are sensible policies being followed in parts of Europe. Germany has increased the share of renewables in its energy mix from 6% to 25% over a decade. A law guaranteeing priority to the grid for renewable energy has provided the incentive for this rise. Local communities have been able to break free from relying on oil giants.

This breakthrough means that emission cuts can be achieved on European soil, rather than exporting our pollution control problems to somewhere else. It is telling that this breakthrough has had nothing to do with emissions trading.

If the EU keeps doing the same thing, it will keep getting the same results. This approach might prove fruitful for Goldman Sachs and BP. But it won’t stop the earth burning.

David Cronin’s book Corporate Europe: How Big Business Sets Policies on Food, Climate and War will be published by Pluto Press in August (www.plutobooks.com).

A version of this article was first published by New Europe (www.neurope.eu).