EU cap-and-trade system left to die by EU parliament

The ETS is dead, long live climate change.

The European Union has voted not to limit the supply of carbon permits, in a move that's widely thought to have dealt "a near-mortal blow" to the EU's Emissions Trading Scheme, according to Alphaville's Kate Mackenzie.

The ETS is supposed to limit the amount of greenhouse gases pumped into the atmosphere, by requiring permits to pollute. The idea was that companies who needed to release greenhouse gases would have to buy the right to do so from companies which had managed to cut their emissions, and a market-based solution to climate change would be found.

Unfortunately, the way the permits were allocated was to give them to companies based on their emissions in year zero, and then only increase the quantity by a little bit each year, limiting growth in emissions. Unfortunately, the global financial crisis came along and did that for us: output fell, and with it, so did emissions. But the number of permits available kept increasing, and now the EU faces a situation where they are basically worthless.

The initial sticking-plaster solution was to "backload" the permits, delaying the scheduled releases by a few years, in order to bring supply back down to a level where it would start constraining carbon emissions again. But on Wednesday evening, the EU parliament voted against the backloading, sending prices tumbling:

Iza Kaminska draws parallels with the Bitcoin crash:

All in all this is yet another valuable lesson in what happens when you make asset classes out of nothing. Unlike with Bitcoin, the cyber-spawned crypto-currency based on nothing but black market interests, the lesson here is not the fact that there is no authoritative mandate, mutual interest or even value — but rather that there is no central authority on standby to flexibly adjust and regulate supply.

But looking at the ETS in terms of its efficiency as a market is somewhat missing the point. The aim, after all, isn't to provide a stable investment vehicle or create an asset class for the sake of it – it's to reduce carbon emissions. The problem is that political constraints were never going to allow the EU to make a carbon market which would actually have a chance of doing that.

The IEA reports that a carbon price of €50 a tonne – ten times the price of an ETS permit at its peak yesterday – is needed just to encourage a switch in the short term from coal to gas generation. The price – and stability of price – required to encourage investment in completely carbon-free generation is likely to be higher still (although renewables advocates disagree). In that context, whether the ETS permits are trading at €3 or €5 is almost irrelevant. Neither price will have anywhere near the required effect.

In that context, maybe the damage done to the ETS is a good thing. Now that it's fairly conclusively demonstrated to be doing nothing to cap emissions, the EU could start getting moving on a genuine market based solution to climate change – a carbon tax, or a cap-and-trade program which actually pays attention to the "cap" part. Either way, it's going to be a while yet.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Garry Knight via Creative Commons
Show Hide image

Why Barack Obama was right to release Chelsea Manning

A Presidential act of mercy is good for Manning, but also for the US.

In early 2010, a young US military intelligence analyst on an army base near Baghdad slipped a Lady Gaga CD into a computer and sang along to the music. In fact, the soldier's apparently upbeat mood hid two facts. 

First, the soldier later known as Chelsea Manning was completely alienated from army culture, and the callous way she believed it treated civilians in Iraq. And second, she was quietly erasing the music on her CDs and replacing it with files holding explosive military data, which she would release to the world via Wikileaks. 

To some, Manning is a free speech hero. To others, she is a traitor. President Barack Obama’s decision to commute her 35-year sentence before leaving office has been blasted as “outrageous” by leading Republican Paul Ryan. Other Republican critics argue Obama is rewarding an act that endangered the lives of soldiers and intelligence operatives while giving ammunition to Russia. 

They have a point. Liberals banging the drum against Russia’s leak offensive during the US election cannot simultaneously argue leaks are inherently good. 

But even if you think Manning was deeply misguided in her use of Lady Gaga CDs, there are strong reasons why we should celebrate her release. 

1. She was not judged on the public interest

Manning was motivated by what she believed to be human rights abuses in Iraq, but her public interest defence has never been tested. 

The leaks were undoubtedly of public interest. As Manning said in the podcast she recorded with Amnesty International: “When we made mistakes, planning operations, innocent people died.” 

Thanks to Manning’s leak, we also know about the Vatican hiding sex abuse scandals in Ireland, plus the UK promising to protect US interests during the Chilcot Inquiry. 

In countries such as Germany, Canada and Denmark, whistle blowers in sensitive areas can use a public interest defence. In the US, however, such a defence does not exist – meaning it is impossible for Manning to legally argue her actions were in the public good. 

2. She was deemed worse than rapists and murderers

Her sentence was out of proportion to her crime. Compare her 35-year sentence to that received by William Millay, a young police officer, also in 2013. Caught in the act of trying to sell classified documents to someone he believed was a Russian intelligence officer, he was given 16 years

According to Amnesty International: “Manning’s sentence was much longer than other members of the military convicted of charges such as murder, rape and war crimes, as well as any others who were convicted of leaking classified materials to the public.”

3. Her time in jail was particularly miserable 

Manning’s conditions in jail do nothing to dispel the idea she has been treated extraordinarily harshly. When initially placed in solitary confinement, she needed permission to do anything in her cell, even walking around to exercise. 

When she requested treatment for her gender dysphoria, the military prison’s initial response was a blanket refusal – despite the fact many civilian prisons accept the idea that trans inmates are entitled to hormones. Manning has attempted suicide several times. She finally received permission to receive gender transition surgery in 2016 after a hunger strike

4. Julian Assange can stop acting like a martyr

Internationally, Manning’s continued incarceration was likely to do more harm than good. She has said she is sorry “for hurting the US”. Her worldwide following has turned her into an icon of US hypocrisy on free speech.

Then there's the fact Wikileaks said its founder Julian Assange would agree to be extradited to the US if Manning was released. Now that Manning is months away from freedom, his excuses for staying in the Equadorian London Embassy to avoid Swedish rape allegations are somewhat feebler.  

As for the President - under whose watch Manning was prosecuted - he may be leaving his office with his legacy in peril, but with one stroke of his pen, he has changed a life. Manning, now 29, could have expected to leave prison in her late 50s. Instead, she'll be free before her 30th birthday. And perhaps the Equadorian ambassador will finally get his room back. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.