{"id":944,"date":"2013-04-26T09:24:19","date_gmt":"2013-04-26T09:24:19","guid":{"rendered":"http:\/\/kevinanderson.info\/blog\/?p=944"},"modified":"2013-11-16T12:41:54","modified_gmt":"2013-11-16T12:41:54","slug":"coaxing-the-mitigation-phoenix-from-the-ashes-of-the-eu-ets","status":"publish","type":"post","link":"http:\/\/kevinanderson.info\/blog\/coaxing-the-mitigation-phoenix-from-the-ashes-of-the-eu-ets\/","title":{"rendered":"Coaxing the mitigation phoenix from the ashes of the EU ETS:"},"content":{"rendered":"

why the near-collapse of Europe\u2019s carbon-trading scheme could be good for reducing emissions<\/em><\/p>\n

A pdf of coaxing the mitigation phoenix <\/a><\/strong><\/em> is also available<\/span><\/p>\n

The past fortnight has been a time of considerable disquiet for those who consider carbon trading generally and the EU\u2019s emission trading scheme (ETS) more specifically a cornerstone of mitigation policy.<\/p>\n

Certainly the potential demise of the most advanced carbon-trading regime yet is reflective of the EU parliament\u2019s collective preference for short-term hedonism over medium-term stewardship[1]<\/a> \u2013 a situation that does not bode well for the development of any meaningful climate change polices.<\/p>\n

However, and more profoundly, carbon trading, as with any market or price-based mechanism, cannot deliver the scale of emission reductions necessary to meet the EU or international community\u2019s commitments to staying below a 2\u00b0C rise in temperature.<\/p>\n

If this were 1990 or even 2000 then gradual reductions in emissions could arguably keep the carbon budget broadly in line with the 2\u00b0C threshold between acceptable and dangerous climate change. But, despite more than two decades of international negotiations, emissions of greenhouse gases continue to rise and, at least for the coming few years, show no sign of changing direction. Consequently, in 2013, the 2\u00b0C threshold is no longer deliverable through gradual mitigation, but only through deep cuts in emissions, i.e. non-marginal reductions at almost step-change levels.<\/p>\n

By contrast, a fundamental premise of contemporary neoclassical[2]<\/a> economics is that markets (including carbon markets) are only efficient at allocating scarce resources when the changes being considered are very small \u2013 i.e. marginal.<\/p>\n

Conversely, for a good chance of staying below 2\u00b0C, future emissions from the EU\u2019s energy system (or from any industrialised, \u2018Annex 1\u2019, nation) need to reduce at rates of around 10% p.a.[3]<\/a> \u2013 mitigation far beyond what marginal markets can reasonably be expected to deliver. To draw an analogy, quantum theories are appropriate for understanding Einstein’s photoelectric effect and other small<\/em>-scale phenomena, but inappropriate for understanding larger<\/em> Newtonian scale observations. Similarly, it is foolish to rely on marginal<\/em> market economics as the mainstay for achieving non-marginal<\/em> reductions in emissions.<\/p>\n

Personally, I consider the ETS and other carbon pricing discussions a serious distraction from decisive mitigation through a stringent and annually tightening suite of standards. These I suggest apply to all sectors and include a strong signal to markets as to how they will change over the coming decade.<\/p>\n

For example, the power companies could only operate if their portfolio of power stations did not exceed 500gCO2<\/sub>\/kWh starting next year; with the standards tightening at 15% p.a. thereafter. Similarly, for cars, from 2014 a maximum of 110gCO2<\/sub>\/km, tightening at around 10% p.a., – and with no option for buying out of the standard. For domestic refrigerators, say 200kWh\/year, again with a clear 10-year signal of the standard tightening at around 10% p.a.<\/p>\n

Such standards would not in themselves be sufficient to meet the EU\u2019s 2\u00b0C obligations. Certainly they could be usefully complemented with market-based approaches, progressive metering tariffs, carbon prices and perhaps even some sector-level trading \u2013 particularly where such mechanisms helped alleviate fuel poverty. However, standards would provide the principal mechanism and in so doing offer a range of benefits over relying on carbon trading or more interventionist regulatory mechanisms.<\/p>\n