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A free market for CO2

In voting on April 16 against a delay in auctioning new CO2 emission quotas, the European Parliament has blunted the main weapon in the fight against global warming and scaled back Europe’s global ambitions a little more.

Published on 17 April 2013 at 15:28

Europe has claimed for years to be in the vanguard of climate protection efforts. That’s over now. First, the 27 member states of the European Union refused to increase their joint target for reducing greenhouse gas emissions. And yesterday, on April 16, the European Parliament followed in their steps, rejecting the long overdue reform of the trade in emission rights.

There is little left of the former spirit of optimism and the will to do everything possible to leave future generations an environment worth living in. The parliamentary vote marks a turning point in European climate policy.

Ten years ago the Europeans were the first in the world to introduce the trade in carbon credits. It was a prestige project that tried to motivate companies, through market-based mechanisms, to invest in environmentally friendly technology and thus make climate protection both cheap and efficient. The project, though, has broken down.

A glut of certificates

Entrepreneurs who invested in climate protection and trusted the promise were not rewarded, but punished. Emission certificates – that is, permits to churn out a certain amount of greenhouse gases – were practically never actually traded. The reason: there is a glut of them on the market. Companies that invested nothing in climate protection were able to carry on harming the environment without having to pay anything. Eventually, their storerooms ended up stuffed with certificates.

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The chance to change this state of affairs is now gone. The MEPs voted against taking a certain number of certificates off the market, at least temporarily, and so to increase the price for emitting greenhouse gases; instead, the market value of the certificates is likely approaching zero. Climate-friendly investments are no longer worth the money. The major tool for climate protection has become unusable.

Loss of an important ally

The responsibility for this disaster lies with the national capitals and with Brussels. For EU Climate Commissioner Connie Hedegaard the lost vote is an another piece of the puzzle in her unsuccessful policy. As Danish Minister for the Environment, she must have witnessed the failure of the international climate conference in Copenhagen when the states were unable to agree on minimal targets. And as European Commissioner, she failed to organise the necessary majorities to get a reasonably committed climate policy from the Europeans.

And because she lost her most important ally, German Chancellor Angela Merkel. Once celebrated as the “Climate Chancellor” because of her commitment, Merkel has gone quiet. Out of the interests of her coalition partner, she admits, Germany keeps mute in Brussels on the subject of climate change – and she also admits that a majority of members of her own party are now voting against climate projects as well. Germany’s pioneering role in the European climate is as far gone as Europe’s pioneering role in the world.


New debt-crisis casualty

With its proposal to retire CO2 credits, the European Commission “was hoping to stabilise a market in freefall,” explains Libération. The French daily continues —

Since 2005, the date of the launch of the system, the price of a carbon credit for a tonne of emissions has fallen from €30 to less than €5 today — a steep decline, which has discouraged industrial investment in cleaner technology. In withdrawing carbon credits from the market, the Commission was hoping to raise the price per tonne of emissions to €10-€12. But now that this measure has been rejected by parliament, the price for a tonne of emissions has dropped to just €3.

“The outcome", notes the Financial Times,

confirmed a reality that had been dawning on politicians and policymakers across Europe well before the ballot. Climate change, which once sat at the top of the bloc’s agenda, has increasingly been trumped by concerns about jobs and growth in an economy sapped by a lingering debt crisis.

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