European ETS


Last week when the European Parliament voted down a proposal to prop up the EU Emissions Trading System’s languishing carbon price by postponing the sale of 900 million emission allowances until the back-end of this decade the price fell to below AU$4. There are obvious concerns about the legislated linking of the Australian carbon price to the EU scheme in mid-2015. Treasury had forecast an EU price of at least $29 in 2015.

Radio National’s PM program had a roundup of political commentary. Julia Gillard on the 7.30 Report was very clear. The legislation was there, it was hard enough to get through the parliament in the first place and we’d have to work with it.

Big business, quick off the mark, was suggesting that link with the EU should occur earlier, so they could buy permits while they were cheap.

Ross Garnaut said, don’t panic, the ETS is only one measure and targets may tighten by impacting on the price:

I don’t think it should in Europe and in Australia action on climate change does not at this stage depend only on the carbon price. It’s the interaction of various direct interventions with a carbon price.

In Europe these other interventions are now very large compared with the carbon price in their effects, you could say that also in Australia where for example the renewable energy target is having a more powerful effect than the carbon price.

There’s an opportunity over the next couple of years and in the period beyond that to tighten up targets that will only be done globally with the major countries. In that context the European carbon price will rise and the Australian price with it and the carbon price which is a more efficient mechanism will become more important than all those other interventions including the renewable energy target. (Emphasis added)

(In the rest of the interview Garnaut talks about putting a cap on the Australian dollar and bringing our interest rates a bit closer to the rest of the developed world.)

Warwick McKibbin says the carbon pricing scheme was strange, bad policy. What the new government after September should do is implement the hybrid McKibbin-Wilcoxen Blueprint.

Anthony Hobley, a London-based analyst, looks at Where to next for EU climate policy? In brief he sees three options, a carbon tax, a patchwork of uncoordinated responses by member states or a command-and-control response. That’s if they don’t take his preferred option, a fundamentally restructured ETS.

Spiegel Online talked to Felix Matthes who sees the EU decision as the end of European climate policy and the squandering of an opportunity to create an international trading system which would do what formal talks have not been able to achieve.

Deutsche Welle points out that some of Europe’s largest energy companies like Shell, Eon and EDF wanted the price increased to support their innovation.

At The Guardian Connie Hedegaard, EU commissioner for climate action, and Phil Hogan, the Irish environment minister who holds responsibility for the portfolio under the Irish presidency, vow to fight on while the World Coal Association called the European parliament vote “a triumph of common sense and balanced policy”.

Will Hutton sees the international consensus on climate change dissolving and the world heading towards a disastrous 6C of warming. He points out that in 2012 the top 200 energy companies spent $674bn on finding new reserves of fossil fuels and that these companies are currently valued at $4trn, with $1.5trn of debt. Downgrading their value could in itself precipitate a new financial crisis.

What is needed is a new vision of how to do capitalism in which enlightened self-interest is hard-wired into its operation, saving us from decades of austerity and environmental disaster. There are instruments at hand – the Unburnable Carbon report sets some of them out – and they mesh with larger arguments for stakeholder capitalism. The political task is to bind them together to underpin a new consensus and a new narrative. There is no time to lose.

The BBC tells us that 22 British Tory MPs voted the EU proposal down against UK official policy, enough to swing the vote which was 315 in favour and 334 against. The BBC’s Roger Harrabin also looks at unburnable fossil fuels. If we burn more than a quarter of what is already owned we are in trouble.

Elisa de Wit and Damon Jones look at some options Australia might take.

Tristan Edis comments at Climate Spectator cross-posted at Crikey. Terry Flew on another thread paints a scenario where the question of Labor’s carbon policy becomes a factor in the post-September leadership issue, assuming an election defeat of course.

You’ll be pleased to know that prime-minister-in-waiting Mr Abbott has plans to save the world. Apart from perhaps ramping up the national target for reduced emissions Abbott is going to take a lead at the G20 meeting hosted in Brisbane next year:

“Where a real global agreement will come is when China and United States reach a point of common position and when that’s backed up with India and the EU,” Mr Hunt told ABC TV on Thursday.

Mr Hunt said Australia would chair the G20 summit in Brisbane next year and it was in a unique position “to bring together the G4 as the basis for a global agreement”.

“I think (Tony’s) a fantastic negotiator,” he said.

Now I’ve heard everything! The G4 is presumably the USA, the EU, China and Japan.

That’s the same Tony Abbott who told Tony Windsor that he’d do anything except sell his arse to become prime minister and who in negotiating with Andrew Wilkie put his feet on the coffee table.

38 thoughts on “European ETS”

  1. The carbon tax has been Labor’s Work Choices. Few Labor MPs and Senators will be sorry to see it go. In fact the group currently known as the “mavericks” – formerly “the Rudd camp” – have more or less said so.

  2. I largely agree with terry @1 labor’s Carbonchoices has if any thing been worse for Labor than Workchoices was for the coalition. The collapse of the European ETS just shows how foolish relying on a “market mechanism” is when it comes to changing the behavior of energy utilities and industry. Its a very stark example of just why economics is more akin to soothsaying than it is to science and why we should be just as skeptical about any sort of grand scheme to “save the planet” from “climate change”

  3. Never thought I’d agree with anything passing Greg Hunt’s lips but his very obvious view that nothing will really change until China and the US get serious about action on AGW is one. I just hope Will Hutton’s stark realism registers with them. The same could be said for the governors of both Washington and Oregon states who have lobbied Obama that they do not want coal loaders built to allow US coal exports to Asia. Contrast that with Australia’s sleepwalking on coal expansion plans in Queensland (Bowen, Seurat, Gallilee) and NSW where a 4th coal loader is planned for the Hunter.

  4. If Terry and Iain are correct (and I think they are) in suggesting that the ALP has lost its bottle and/or been politically incompetent on climate policy, activities such as the Climate Action Conference and the campaigns discussed there will need to become a key focus for action and activism on climate change in Australia for at least the next few years.

  5. Never mind the candles. When they light a thousand Loy Yangs across Africa, no one will need to curse the darkness.

  6. Bill, I recall turning you and your two friends to stone at the break of dawn.

  7. Ah, the Hobbit, the Hobbit, but I’m still struggling to understand your point?

    Wasn’t the Hobbit a children’s book?

  8. and wasn’t it Bilbo who kept the trolls up talking, and Gandalf’s influence is a change made in the movie to rob Bilbo of even the slightest streak of heroic spirit? Or am I misremembering the bad children’s book I haven’t read for 20 years?

  9. and wasn’t it Bilbo who kept the trolls up talking, and Gandalf’s influence is a change made in the movie…?

    Nope. In the book, Bilbo didn’t do anything heroic until the bit with the spiders.

    … the bad children’s book …

    Wash your mouth out!

  10. Its boring to keep saying this, but the ALPs ETS doesnt exist yet (and likely wont).

    What we’ve had since last July is the GRNs policy of a fixed levy on CO2. It is paid to the state, which can and has redistributed it, it isnt ‘traded’, it isnt a ‘market scheme’, and it works.

  11. Which, incidentally, means that if you want or need to change the price of it, the government can, via simple regulation.

  12. As soon as you say that something is a “European Union scheme”, you can now guarantee a fair degree of in-principle opposition from Greeks and, to a lesser degree, Italians, who now view the EU less as a supranational parliament and more as an occupying force.

  13. who now view the EU less as a supranational parliament and more as an occupying force.

    Which reminds me of the gag circulating about the German chancellor entering Greece:

    ‘Angela Merkel’
    ‘No, just vacation’.

  14. I don’t trust the ALP to reason what their own “Work Choices” is. I would have gone for throwing single parents onto Newstart, but what do I know?

  15. What we’ve had since last July is the GRNs policy of a fixed levy on CO2. It is paid to the state, which can and has redistributed it, it isnt ‘traded’, it isnt a ‘market scheme’, and it works.

    You mean it’s a *gasp* tax !?!!

    Presumably you’re calling it a “GRNs policy” because it lasts for 3 years, instead of 1 year.

    Which, incidentally, means that if you want or need to change the price of it, the government can, via simple regulation.

    No, the price is fixed by the Act. A change would require another Act of Parliament.

  16. In March 2011 the ALP was polling 39 per cent, and the 2PP was about 50:50. By September 2011, the ALP was polling 28 per cent, and the 2PP was 42:58. During that period, the Greens vote increased by one per cent at most. All of the rest went straight to the Coalition.

    While there may have been other issues between March-Sept 2011, such as stories about Craig Thomson beginning to circulate, the carbon tax was the biggie. The 2013 Federal election result may well have been decided during those six months.

  17. Looks like Australia will show some of that “global leadership” after all. Come September 16, we will be the first nation state to formally dump a carbon tax.

  18. That is a huge amount of wishful thinking there, Bill. Abbott has yet to win, and despite the way the polls look now, there is a long run up to that election, a run during which time people will focus their minds on exactly what Abbott as a leader would mean. That is not a very pleasant thought.

  19. the bad children’s book

    That explains why I never read it, as I was always a good child.

  20. Terry: I would compare the narrative of “the carbon tax ruining the ALP’s chances” against Possum’s analysis. The decline in the polls started in October 2010, accelerated in March 2011, and hit a nadir in August 2011; that would be carbon tax related. But there was a recovery in September, a plateau around January 2012, and after another another drop (probably Thomson-related), the ALP was back to 48 2PP around November 2012. Since then, it’s gone down again, but that would be a surfeit of ‘leadershit’, wouldn’t it?

    My short summary: the carbon tax affected the ALPs chances in the short term, but in the long term is just one factor – and not even the major one – hindering the party winning in September.

  21. What has happened to the EU reflects what I have been saying about the ETS for years: Trading schemes simply don’t provide the certainty required for investment in power generation.

    In reality, progress in the EU has depended more on things like the FIT and the ability of renewables to compete with some of the more expensive forms of power generation. It has also depended on people acting and companies seeing the opportunities.

    I don’t support the LNP’s direct action LITE but do believe strongly that we should forget about all the price on carbon twaddle and drive the required action more directly.

  22. I’d be pretty happy with anything that reduces emissions massively. The combo of a relatively high CO2 levy (its not a tax, lord knows Why Gillard conceded on that, d’oh) and the RET appears to be working better than anything Australia has previously come up with.

    Trading schemes dont seem very effective to me. And yes, parliament can change the price. That’s better than relying on markets, as we’ve seen.

    I call it a GRNs policy as it was a GRNs policy – for an interim fixed price, and without the minority status and Bandt, the ALP would have certainly gone directly to an ETS like NZ.

    That said, all these things need to be spun better.

    First, theyre temporary: markets wont get us there, but there is a certain point an which investment shifts to renewables and the prices drop, at which time these schemes can be ratcheted down.

    Second, they will lead to cheaper power in the long run (why people arent making more of this amazes me – its already cheaper to build new wind power than new coal power)

    Third, for eveythign to stay the same, everything must change. These can be sold as conservstiev policies that maintain our current lifestyles rather than sacrifice them.

    What will destroy them is inaction.

    Once youve harnessed the inherent conservatism of roughly 50% of humanity, you’re home and hosed.

  23. Lefty E, calling something a “levy” and then saying it’s not a tax is sophistry – the words mean the same thing. That said, I agree that Julia Gillard should have stuck with the line that it’s not a tax but an ETS with an initial fixed price period, which is also what it is – it’s only a tax in a narrow, legalistic sense, since it’s clearly part of a broader ETS policy. Mind you, that wouldn’t have stopped Tony Abbott from calling it a tax, which he was already doing when the CPRS bills were still in Parliament.

    It certainly remains to be seen how effective the ETS will be, if it ever comes into operation. The fixed price is actually not a bad advertisement for a straight carbon tax.

    I call it a GRNs policy as it was a GRNs policy – for an interim fixed price, and without the minority status and Bandt, the ALP would have certainly gone directly to an ETS like NZ.

    This is little a bit revisionist. Rudd’s CPRS also had an initial fixed price period, but it was only 1 year long, rather than 3 years. The 3 years was a Greens’ innovation (and a good one, it seems). The idea of a fixed price period wasn’t.

    Yes, after the CPRS fell over, Bob Brown suggested introducing a modest carbon price to act as an interim policy until there was political will for an ETS, but that proposal didn’t have much to do with the policy that was ultimately introduced.

    As I’ve said before, the current carbon price policy is a slightly tweaked version of the CPRS, which itself is a slightly tweaked version of the emissions trading scheme proposed under Howard.

    However, I have no problem giving credit to the Greens for using their post 2010 parliamentary numbers to get the ALP to enact a carbon price, which it had been clearly backing away from.

  24. Re: The Hobbit as bad children’s book,when the movie came out there was a big debate on role-playing blogs about the depiction of the dwarves. Many RPG-ers complained they were not at all like the book. I had to go dredge up the text and paste it in comment sections to point out that Tolkien doesn’t describe the dwarves. He’s such a good writer that he never described the main characters in his story. It’s a bad children’s book.

  25. A small correction. Professor Tolkien did transcribe Bilbo’s description of the colours of the dwarves’ beards, and on this point the book and the film differ considerably.

  26. No, I think that was the colour of their hoods. Even the length and presence of beards is ignored. The washup of my dispute with the neckbeards of the role-playing world can be found here.

    (And I find debating the colour of beards in an imaginary world so much more fulfilling and practical than talking about current efforts to deal with the greatest crisis facing humanity, which are even more woeful than Tolkien’s writing and plagued with even more magical thinking and denialism than his fanbase exhibit on a bad day).

  27. I stand corrected. Bilbo only recorded the colours of the beards of Dwalin, Balin, Fili and Kili – hardly surprising as he was somewhat flustered at the time.

  28. It was the hoods, not the beards; faustusnotes is correct. However, one dwarf (Bombur) was singled out as extremely fat.

    It wasn’t so hard for me to distinguish the other 14 dwarves, even as a five year old. I saw the 1977 TV animation, and was bought the spin-off illustrated copy of the book (which is still at my mum’s). It’s not hard to distinguish Balin and Dwalin with their pictures provided. But that’s kind-of cheating, isn’t it?

  29. Peter, it turns out that much of the modern RPG-ers frustration with Peter Jackson’s depiction of the dwarves arises from his failure to adhere to the conventions set in the 1977 animation. They want snow white dwarves. Had Jackson cast snow white dwarves in the movie, would it have been particularly popular? I think not, it would have looked profoundly stupid. I prefer the sinister dwarves of the film to the silly dwarves of the book – but I’m willing to be critical of Tolkien, and for many RPG-ers that is a huge sin!

  30. Tim , no quibble with the rest of your post though the CO2 price is a classic levy in the sense that its targeted to those doing the thing the govt is trying to minimize: big polluters.

    People dont generally pay it. Not even those purchasing energy, as in a sales tax.

    In that sense, it’s a clearer case of a levy than, say, the Medicare levy, which is probably a tax 🙂

    I also think she should have gone with levy as there a sense in the public mind already that levies are temporary.

    Anyway, too late for that.

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