Greenhouse Effect – Global Carbon Trading

In 2005 the EU established a cap for carbon emissions and trade program. This cap set a limit on the CO2 industry and utilities could emit. The cap is to reduce the greenhouse gases that cause global warming. A low cap will cost business, and a high one will have little impact reducing global warming. In 2017 the cap was 1.7 per cent annually that would reduce emissions by 43 per cent by 2030. In the EU carbon targets affect 11,000 energy and industrial plants.

With the trade program, each company has an emit target and can emit what they are allowed,  reduce their emissions below that permitted and sell or bank the surplus of their emissions or emit above their allowance and buy EU Allowances in the marketplace to cover it. The market for carbon trading was $176 billion in 2011 and is expected to exceed $1 trillion by 2020.

The principles of carbon market were set in 1997 through what is known as the Kyoto Protocol. The two most important carbon markets are the EU Emissions Trading System and the UN’s carbon offsetting scheme, and these are considered as failing. Although new carbon markets based on these schemes are being planned in both developed and developing nations. The reason for them failing is due to the link between carbon markets in the developed world and offsetting opportunities in developing countries and where there is some evidence that carbon markets have been compromised.

The ER trade program has failed to deter the industry from polluting by setting a high enough price. In the US carbon market has had limited success but the current administration has disdain for climate change, how successful that carbon market becomes remains to be seen. China seems to have some good news here, and that’s because they have started their carbon market that they have introduced in stages across the different industries.

There seems to be a consensus that the carbon markets have not been as successful as they should have been. A market approach works when investors have certainty about the market itself, and that isn’t quite the case here. Companies should be charged for the waste they generate and until we get wide-ranging regulations that are enforceable on limiting emissions in place the consequences will be terrible. Ultimately, those who pollute – they should have to pay.



* Tahir Maher is a member of the LDV editorial team and the Chair of the English Party

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  • “There seems to be a consensus that the carbon markets have not been as successful as they should have been.”
    So the initiative has actually been relatively successful, in that emissions have been reduced, just not achieving the forecasts.

    From the list of failings, it would seem that much has been learnt about the challenges of doing something globally. I suspect the solution isn’t to talk about the program as having ‘failed to deter’ but to celebrate what success it has actually had and set expectations that now we are moving in the right direction, things are going to be shifting up a gear. Whilst applying the lessons learnt to modify the program.

    As an aside, I assume the UK’s allowance is part of the EU’s allowance and hence the UK’s post-Brexit allowance is subject to negotiation with the EU… As I’ve noted previously, Brexit does provide a rather useful opportunity to move the UK economy towards a more sustainable and ‘green’ one, this might be the kick it needs.

  • William Fowler 15th Aug '18 - 11:39am

    Well reform of how energy is paid by consumers would help reduce energy consumption. good policy for the LibDems as it would headline as free electric, gas and water, although it would only be the first £10-20/month worth of consumption that would be free, standing charges gone and then the next rate would be set by the energy companies but perhaps linked to the actual energy price (three times that price?) so the current rip-off would be stopped. Anyway, having the option to get free energy by changing usage downwards would appeal to the general public as a means of kicking the energy companies between the legs and also show that the LibDems were on their side.

  • Peter Hirst 16th Aug '18 - 4:58pm

    Carbon pricing is like many good ideas – not straightforward to implement. Perhaps it is better to incentivise carbon saving in terms of tax credits. The important thing is to obtain reliable and verifiable levels for all emissions contributing to climate change including indirect ones from all major industries and services.

  • Peter Martin 17th Aug '18 - 11:16am

    Carbon pricing has to be a good thing but equally there can’t just be an ” EU Emissions Trading System” , whether or not the EU includes the UK. There has to be a Global system to tackle Global warming.

    The EU is a in a dilemma over the contribution of nuclear power to carbon reduction. The French want more of it but the Germans are phasing theirs out. The EU needs to get its act together on that.

    The EU could also decide to fund fusion research, maybe in a Manhattan style effort, which potentially can give unlimited clean energy from sea water. Again, whether or not the UK in an EU member shouldn’t prevent UK involvement in that project. The needs of the planet should trump any petty local squabbles.

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