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Wednesday 23 Aug 2017 | 08:21 | SYDNEY
Wednesday 23 Aug 2017 | 08:21 | SYDNEY

So, Europe's ETS works after all?



29 April 2013 14:39

Last Monday's Interpreter piece from Environmental Studies Professor Roger Pielke Jr was one of a number of commentaries in the international media arguing that Europe's emissions trading scheme (ETS) had essentially failed as a mechanism for reducing carbon emissions.

Now I see that there's been something of a push-back to that assessment, arguing that the rock-bottom price of European emissions permits is not a bad thing, and even that the European parliament's recent failure to prop up that price was a blessing. You can read articles here, here and here, but let me extract one section from commentator David Roberts:

...the ETS is not a mess/broken/dying, it’s working like it’s supposed to. The goal of a cap-and-trade system is not to create a high price on carbon, or a low price on carbon, or any particular price on carbon. It is to reduce carbon emissions along a pathway specified by a series of targets (17 percent by 2020, etc.). The EU is on that pathway. Emissions are expected to come in under the cap, which means the cap-and-trade program is working.

Now, as it happens, the recession is what did most of the work to put the EU on that pathway. Complementary clean-energy policies (renewable energy mandates, feed-in tariffs) also played a big role. That just didn’t leave much work for a carbon price to do. The EU doesn’t need a high price on carbon to stay on the emissions-cutting pathway, at least in the short term, so the short-term price on carbon is low. Presumably, when the EU economy picks back up, there will be more work for a carbon price to do. If so, the price will go up. Cap-and-trade programs are designed to be responsive to circumstances.

Roger Pielke said the lesson from Europe is that 'markets don't change carbon intensities, technology does'. But the counter-argument from this collection of articles is that the market mechanism has lowered Europe's emissions (although the recession has played a part too), and it would be working even better if not for Europe's policy mistakes: first, too many permits were released, which meant polluting remained cheap; and second, Europe undermines it ETS with various clean energy and energy efficiency targets.

Photo by Flickr user jikatu.

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