Emission trading: Blessing for polluters?
THE issue of climate change and its consequences are no more limited to a regional boundary -- it's global now. A wide variety of policies and measures are available to governments to limit or reduce greenhouse gas emissions. Besides regulations and standards, there is an increased focus on pollution as a social and economic issue. Recently economists have focused on market-based forms of guideline as a possible alternative to command and control Instruments. As per this school of thought, market-based instruments -- such as pollution charges, subsidies, tradable permits, and some types of information programmes can encourage firms or individuals to undertake pollution control efforts that are in their own interests and that collectively meet policy goals. Carbon Trading Scheme is one form of limiting access to a common property resource by issuing usage rights. It is the process of buying and selling carbon credits. National Allocation Plan (NAP) sets out the total number of allowances to be issued and distributed to national installations. Large companies or organisations are assigned a quota of carbon that they are allowed to emit. If a company's emissions are less than its quota then it can sell credits; if emissions are more than it, then the company will need to buy carbon credits. Carbon trading or more precisely emission trading is a complex system which sets itself a simple goal: to make it cheaper for companies and governments to meet emissions reduction targets. If examined closely, then it becomes perceptible, an emission trading is designed in such a way that the targets can generally be met without actual reductions taking place. A combination of industrial lobbying efforts and measurement difficulties have ensured that the pollution rights granted to private firms within cap and trade schemes are in many cases more generous than the polluters need to cover their existing level of emissions. The surplus of permits can then be sold to other polluters so that they too might avoid reducing their greenhouse gas emissions. Member States can auction up to 5% of allowances for Phase-1 (Y2005~Y2007) of EU ETS (European Union Emission Trading Scheme), up to 10% for Phase-2 (Y2008~Y2012). In practice, the scheme has failed to incentivize emissions reduction. It is evident that, the vast majority of permits have been handed out for free (a practice known as 'grandfathering') in the EU ETS ,and the same is true for other cap and trade schemes. The number of permits awarded is calculated according to existing levels of pollution, which means that those who have polluted most in the past are rewarded with the greatest subsidy. This free gift of pollution rights to some of the worst industrial polluters amounts to one of the largest projects for the creation and regressive distribution of property rights in history. This multibillion dollar scheme's basic premise is that polluters can pay someone else to clean up their mess. In the process, it has rewarded polluters for continued pollution while at the same time causing social and environmental injustice. The likely consequences of climate change vary from region to region, but include widespread drought, desertification, flooding and glacial melt. Carbon trading has created a system whereby different greenhouse gases are treated as equivalent and quantifiable “things” or “commodity” opening them up to the possibility of exchange. An emissions cut in one place becomes “equivalent” to, and thus exchangeable with, a cut or a compensatory measure elsewhere. At first glance, this may seem uncontroversial. As the World Bank puts it, “greenhouse gases mix uniformly in the atmosphere, which makes it possible to reduce carbon emissions at any point on Earth and have the same effect”. Climate change is a global problem rather than a local one, so it should not matter whether these reductions are made in Bangladesh or Bolivia. The whole trading scheme actually represents a means to shift responsibility of taking action for tackling climate change to Southern countries and is aimed at the wrong target. It is not directed at reorganising industrial societies' energy, transport and housing systems -- starting today -- so that they don't need coal, oil and gas to burn. It is not contributing to the de-industrialisation of agriculture or the protection of forests through the recognition of local and Indigenous peoples' tenure rights or food sovereignty. Instead, it is organized around keeping the wheels on the fossil fuel industry for as long as possible. It sets the scale of the commitments to be made, but says little about how that will be achieved in practice. As the saying goes -- a third failure starts to look like a consistent trend. EU's Emissions Trading Scheme is not living up to its billing as a means to reduce carbon emissions. In Phase-1 of the scheme, too many permits were in circulation as a result of over-generous allocations across the board. This problem has been repeated in the Phase-2, with the ability to trade emissions within the EU for offset credits from outside the trading bloc the main means of over-allocation. In the Phase-3 (Y2013~Y2017) of the EU ETS, some of these loopholes may be closed, but the increasing complexity and international linking of the European with other carbon markets means that others will be opened -- allowing emissions 'reduction' permits to continue circulating without a significant need actually to reduce emissions domestically.
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