EU Carbon Trading Scheme Copyright David Strom. What You Absolutely Need to Know Carbon Trading Scheme CANNOT ACHIEVE Carbon reduction goals—Means not

EU Carbon Trading Scheme

Copyright David Strom

What You Absolutely Need to Know

• Carbon Trading Scheme CANNOT ACHIEVE Carbon reduction goals—Means not commensurate with the ends.

• Europe has achieved carbon reduction since base year 1990, but NOT because of any climate change policy.

• Recent studies commissioned by EU demonstrate that even the modest carbon trading scheme of today will have serious economic consequences.

• Carbon reductions in Europe will probably result in increased carbon emissions elsewhere as economic activity moves.

• System as it exists today is based upon political allocation/economic inefficiency, NOT reduction in carbon.

What You Absolutely Need to Know

Point 1: Cannot Achieve Goals• The goal set by political leaders in Europe and by

President Obama is to reduce CO2 emissions by 80% in 2050.

• Current Carbon trading scheme covers ~10,000 point sources of emissions, which emit 40% of CO2 in Europe.

• 100% reduction in these sources=40% reduction in carbon, or half of goal. As these sources are industrial and power plants, obviously they will continue to emit substantial carbon.

Point 1: Cannot Achieve Goals• Ergo the carbon trading scheme is only the

first tentative step in plan to reduce CO2

• The main thrust of carbon reduction plan has just begun to be discussed: carbon taxes that will directly impact consumers and transportation industries.

Point 1: Cannot Achieve Goals

TAKEAWAY: CARBON TRADING SCHEME IS NOT

A VIABLE MECHANISM TO ACHIEVE GREENHOUSE GAS

REDUCTION GOALS;IT IS CAMEL’S NOSE UNDER TENT

Point 2: CO2 Reductions Due to Economy

• Europe HAS seen carbon reductions since 1990—Kyoto base year.

• Pretty much all of that reduction took place in 1990s, not because of carbon trading scheme which began this decade.

• Years in which reduction took place: early 90’s and 2008 primarily.


• Why have EU CO2 reductions taken place?

• THE LARGEST SINGLE CONTRIBUTOR TO CO2 REDUCTIONS WAS THE COLLAPSE OF COMMUNISM AND THE RETIREMENT OF INEFFICIENT EAST GERMAN FACTORIES.


•EU Carbon Trading Scheme was set in motion in 2003, long after reductions were made. Trading began in 2005


• Emissions again went down considerably (6%) in 2008, after rising during much of the trading period.

• 2008, of course, is when the full-blown economic crisis began to hit. Industrial production plummeted.


TAKEAWAY: Carbon trading has had little or

nothing to do with Greenhouse Gas reductions.

THE BEST WAY TO REDUCE GREENHOUSE GASES IS TO HOBBLE

THE ECONOMY.

Point 3: Carbon Trading Scheme Projected to Harm Economy

• Unsurprisingly recent studies show that forced reductions in CO2 emissions will harm EU economy.

• Some economic sectors disproportionately hurt, especially heavy industry.

• Power generation companies unlikely to be directly hurt, as they pass on costs to consumers.

Point 4: Carbon Trading Scheme Displaces Production, Unlikely to Reduce Emissions

• Carbon Trading Scheme, or rather adding a cost to carbon use, is likely to displace economic activity to regions with less stringent regulation.

• Quite likely to accelerate trend to de-Industrialization of 1st world, moving activity overseas.


• Developing world less environmentally conscious. You do the math.

• This phenomenon is called Carbon “leakage,” where carbon emission is not actually reduced, just moved.


TAKEAWAY: EU or Developed World Carbon

Trading Schemes or other mechanisms to reduce Greenhouse Gas Emissions very unlikely to work

as planned. Instead they will de-industrialize the Developed World.

Point 5: Carbon Trading Scheme Actually Based on Political Spoils System, Not Economics

• Carbon trading scheme is promoted as a means to bring market forces to bear with the goal of reducing CO2 emissions.

• Actual practice shows what should be obvious with any massive government program: it is a spoils system that transfers wealth from the less powerful to the more powerful.


• How it works: permits given away for free, then traded on the open market.

• In other words, there is huge economic benefit to getting more permits than necessary. Huge costs associated with getting fewer than necessary.


• Under current system some companies have experienced huge windfalls, as they have raised prices to consumers AND sold their excess permits.

• Other companies have of course suffered greatly, as their allocation of permits was insufficient to meet their needs.


TAKEAWAY:It is a basic fact of political/economic life

that when resources are distributed based upon the exercise of power, then the powerful will benefit at the expense

of the less powerful.

Point 6: Carbon Trading Creates Inefficiencies

• In practice the price of carbon permits has varied wildly, by more than 400%.

• Huge variations in price further increase the costs of production in developed world, as industry cannot plan adequately for the cost of their inputs.

TAKEAWAY:• Carbon Trading can’t achieve its goals• Carbon costs will harm the economy• West will de-industrialize as carbon intensive

industries move to developing world• Carbon trading has created a spoils system

where wealth is transferred from the less powerful to the more powerful

• The only way to achieve greatly reduced carbon emissions with current technology is to crush the economy.

Documents

EU Carbon Trading Scheme Copyright David Strom. What You Absolutely Need to Know Carbon Trading Scheme CANNOT ACHIEVE Carbon reduction goals—Means not