EU carbon permit scheme gets a sticking-plaster fix

Permits to be backloaded, constraining supply.

The EU has finally got around to slapping a sticking-plaster on the woefully unfit-for-purpose carbon trading market. The European parliament has voted in favour of a plan to allow "backloading" of carbon permits — delaying the scheduled releases of permits by a couple of years — in order to deal with the record low prices those permits have reached (around €5 per tonne of CO2).

Alphaville's Kate Mackenzie writes:

The price collapse is down to a few things: slower economic growth, changes to the energy mix — and arguably, some imperfect policymaking to begin with.

The carbon permit scheme had always been disliked by many left-wing environmentalists for allocating initial permits based on emissions — and then increasing those allocations for the first few years of the scheme, albeit at a decreasing rate. The idea was to put a cap on the amount of emissions growth major companies could get away with, but as the economic slow-down and changing technology started to hit, those major companies found that they had far more permits than they needed.

The permit scheme eventually turned into a mild handout to the biggest companies, with the size of that handout vaguely dependent on how much they had cut their emissions.

If the backloading amendment works, it should constrict the supply of permits, and actually encourage those companies to cut their emissions again. If the scheme works well, the scarcity of permits should mean that there is a real financial cost to emitting excess CO2.

But the backloading will only help in the short run. The state of affairs is such that the EU still has to release those permits at some point. The Wall Street Journal yesterday looked at possibilities to move beyond the temporary fix, including:

Canceling CO2 permits, including other industries in the market to increase demand, or even a mechanism to directly manage the prices, which experts say could resemble the way central banks manage currencies.

The problem is that any plan which actually leads to a constraint on carbon usage is unlikely to be particularly popular with the businesses affected by it. The EU is basically in the same position it was when it tried to start the carbon permit scheme, except that now, industry can plead that it is already part of a carbon trading scheme.

Current legislation will expire in 2020, and from there, the EU can set about building an emissions reduction scheme which is fit-for-purpose. Until then, there'll be many more sticking plasters to come.

Photograph: Getty Images

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

Photo: Getty
Show Hide image

The government needs more on airports than just Chris Grayling's hunch

This disastrous plan to expand Heathrow will fail, vows Tom Brake. 

I ought to stop being surprised by Theresa May’s decision making. After all, in her short time as Prime Minister she has made a series of terrible decisions. First, we had Chief Buffoon, Boris Johnson appointed as Foreign Secretary to represent the United Kingdom around the world. Then May, announced full steam ahead with the most extreme version of Brexit, causing mass economic uncertainty before we’ve even begun negotiations with the EU. And now we have the announcement that expansion of Heathrow Airport, in the form of a third runway, will go ahead: a colossally expensive, environmentally disastrous, and ill-advised decision.

In the House of Commons on Tuesday, I asked Transport Secretary Chris Grayling why the government is “disregarding widespread hostility and bulldozing through a third runway, which will inflict crippling noise, significant climate change effects, health-damaging air pollution and catastrophic congestion on a million Londoners.” His response was nothing more than “because we don’t believe it’s going to do those things.”

I find this astonishing. It appears that the government is proceeding with a multi-billion pound project with Grayling’s beliefs as evidence. Why does the government believe that a country of our size should focus on one major airport in an already overcrowded South East? Germany has multiple major airports, Spain three, the French, Italians, and Japanese have at least two. And I find it astonishing that the government is paying such little heed to our legal and moral environmental obligations.

One of my first acts as an MP nineteen years ago was to set out the Liberal Democrat opposition to the expansion of Heathrow or any airport in southeast England. The United Kingdom has a huge imbalance between the London and the South East, and the rest of the country. This imbalance is a serious issue which our government must get to work remedying. Unfortunately, the expansion of Heathrow does just the opposite - it further concentrates government spending and private investment on this overcrowded corner of the country.

Transport for London estimates that to make the necessary upgrades to transport links around Heathrow will be £10-£20 billion pounds. Heathrow airport is reportedly willing to pay only £1billion of those costs. Without upgrades to the Tube and rail links, the impact on London’s already clogged roads will be substantial. Any diversion of investment from improving TfL’s wider network to lines serving Heathrow would be catastrophic for the capital. And it will not be welcomed by Londoners who already face a daily ordeal of crowded tubes and traffic-delayed buses. In the unlikely event that the government agrees to fund this shortfall, this would be salt in the wound for the South-West, the North, and other parts of the country already deprived of funding for improved rail and road links.

Increased congestion in the capital will not only raise the collective blood pressure of Londoners, but will have severe detrimental effects on our already dire levels of air pollution. During each of the last ten years, air pollution levels have been breached at multiple sites around Heathrow. While a large proportion of this air pollution is caused by surface transport serving Heathrow, a third more planes arriving and departing adds yet more particulates to the air. Even without expansion, it is imperative that we work out how to clean this toxic air. Barrelling ahead without doing so is irresponsible, doing nothing but harm our planet and shorten the lives of those living in west London.

We need an innovative, forward-looking strategy. We need to make transferring to a train to Cardiff after a flight from Dubai as straightforward and simple as transferring to another flight is now. We need to invest in better rail links so travelling by train to the centre of Glasgow or Edinburgh is quicker than flying. Expanding Heathrow means missing our climate change targets is a certainty; it makes life a misery for those who live around the airport and it diverts precious Government spending from other more worthy projects.

The Prime Minister would be wise to heed her own advice to the 2008 government and “recognise widespread hostility to Heathrow expansion.” The decision to build a third runway at Heathrow is the wrong one and if she refuses to U-turn she will soon discover the true extent of the opposition to these plans.

Tom Brake is the Liberal Democrat MP for Carshalton & Wallington.