European Union MEPs Tuesday voted against propping up their anemic carbon trading market, the emissions-trading system (ETS). The ETS is a ten year old flagship market scheme for trading carbon emissions with the goal of increasing the price of carbon and thereby creating incentives to reduce carbon emissions-intensive industry.
In a 334 to 315 vote, European Parliamentarians voted down a proposal to limit the supply of greenhouse gas credits to the European market in order to drive up the price of carbon, which is at record lows per ton. The idea, called “backloading,” was to remove 900 tons worth of allowances and reintroduce them in five years, when, presumably, the price of carbon has increased. While Poland, with its large coal industry, was expected to vote against the proposal, recommended by the Environment Committee and the European Commission, the UK unexpectedly voted against it as well.
Despite the fact that most European environmental policies are set by the individual countries, the ETS sets a carbon price for the entire European Union. Many now fear that by abandoning the ETS, ministers are signaling a greater willingness to abandon environmental policies linked to slowing climate change.
According to The Economist:
Large European companies,
in particular energy-intensive ones such as chemicals makers, mounted a
fierce lobbying campaign against the ETS, and some of them would also
like to see a reduction in European subsidies for renewables. National
renewable-energy subsidies are under pressure anyway, for budgetary
reasons. And as several observers of the parliamentary debate argue, the
ETS vote sends a political signal that Europeans do not care much about
their flagship environmental policy—a signal that might influence
national policies, too.
The project of ETS reform will now go back to the Environment Committee where it is possible that compromises will be made, and another proposal brought up for a vote. In the meantime, carbon credits are essentially junk paper.
Tamara Gilbertson of Carbon Trade Watch, said in a BBC interview that she wasn’t dismayed by the lack of confidence MEPs showed in the carbon trading market:
This isn’t the first time we’ve seen fundamental flaws in the scheme. We’ve seen the scheme riddled with fraud, we’ve seen windfall profits from the biggest polluting industries all over Europe. The cap and trade system functions because there are offsets and we’ve seen huge human rights abuses all over the world because of the offsetting that’s happened. So yes, abandon it. This is something that is fundamentally, inherently flawed and is not going to be fixed by ‘backloading’ credits…The ETS was designed by the same polluters who are profiting from it today.
Carbon Trade Watch, and other climate change organizations, favor more direct policies to limit carbon emissions at the source, strict regulations and taxes on carbon, as opposed to “cap and trade.”
And yet the vote comes at a time when agreements are proliferating to form carbon trading markets all over the world. In 2012, California established a carbon trading market, and just recently announced success in developing a scheme compatible with Quebec.
Also Tuesday, Australia and China agreed to form partnerships aimed at integrating their respective carbon markets.