Azara Blog: EU carbon trading scheme is allegedly not working

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Date published: 2007/06/05

The BBC says:

The EU's carbon trading scheme has increased electricity bills, given a windfall to power companies and failed to cut greenhouse gases, it is claimed.

An investigation by BBC Radio 4's File on 4 programme has found that after two and half years the scheme has yet to cut in carbon dioxide emissions.

The consumer body Energywatch said customers are getting a raw deal.

But a government minister has promised that the scheme's next phase will be a big improvement.

The EU's Emission Trading Scheme - a key part of the UK Government's drive to combat climate change - began in 2005 and created a trade in carbon allowances.

It is essentially a permit to pollute.

Power generators received their allowances free of charge but were allowed to reflect the value of those in increased prices to customers, as if the companies had actually had to buy the allowances.

Energywatch believes this increased electricity bills by about 7% in 2005.

And according to one government estimate, that delivered windfall profits of up to £1.3bn to the generators in that year - higher than environmental campaigners had claimed last year.

However, so far the carbon scheme has brought no clear payback in terms of cutting emissions.

Provisional government figures from the Department for Environment Food and Rural Affairs (DEFRA) suggest CO2 output in Britain actually went up, by 1.25% last year wiping out a slight drop of 0.01% in 2005.

It is also reckoned that CO2 emissions across the EU also rose by between 1 and 1.5% over the last two years.

The EU carbon trading scheme is indeed fairly poor, although no doubt it can be fixed in time. The EU should instead have imposed a flat rate carbon tax. But it's unbelievable that the BBC manages to take an increase in CO2 output in Britain as indicating anything about the failure or not of the scheme. It is stupid to compare today with yesterday when evaluating this scheme. You instead have to compare today with what today would have been without the scheme. Of course one can only make estimates of the latter. But it's quite possible (although unlikely, given how broken the scheme is right now) that the rise in emissions would have been even worse without carbon trading. Time for BBC journalists to be given a lesson in Logic 101.

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