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.

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Quiz: Can you identify fake news?

The furore around "fake" news shows no sign of abating. Can you spot what's real and what's not?

Hillary Clinton has spoken out today to warn about the fake news epidemic sweeping the world. Clinton went as far as to say that "lives are at risk" from fake news, the day after Pope Francis compared reading fake news to eating poop. (Side note: with real news like that, who needs the fake stuff?)

The sweeping distrust in fake news has caused some confusion, however, as many are unsure about how to actually tell the reals and the fakes apart. Short from seeing whether the logo will scratch off and asking the man from the market where he got it from, how can you really identify fake news? Take our test to see whether you have all the answers.

 

 

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Amelia Tait is a technology and digital culture writer at the New Statesman.