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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Leader: Labour is failing. A hard Brexit is looming. But there is no need for fatalism

There is nothing inevitable about the right’s supremacy or a catastrophic Brexit.

Democracy depends on competent opposition. Governments, however well intentioned, require permanent and effective scrutiny to meet the public interest. For this purpose, the role of Her Majesty’s Opposition was enshrined in law 80 years ago. However, at present, and in the week Article 50 is invoked, this constitutional duty is being fulfilled in name alone. (The Scottish National Party speaks only for the Scottish interest.)

Since re-electing Jeremy Corbyn as its leader, the Labour Party has become the weakest opposition in postwar history. It lost the recent Copeland by-election to the Conservatives (a seat the Tories had not held since 1931) and trails the governing party, by up to 19 points, in opinion polls. The Tories feel no pressure from Labour. They confidently predict they will retain power until 2030 or beyond. Yet as the poll tax debacle and the Iraq War demonstrate, prolonged periods of single-party rule run the danger of calamitous results – not least, this time, the break-up of Britain.

Under Mr Corbyn, who formally lost the confidence of 80 per cent of his MPs last summer (and has not regained it), Labour has the least impressive and least qualified front bench in its history. Its enfeeblement has left a void that no party is capable of filling. “The grass-roots social movement of the left that was supposed to arrive in Jeremy Corbyn’s wake has not shown up,” the academic Nick Pearce, a former head of Gordon Brown’s policy unit, writes on page 36.

In these new times, the defining struggle is no longer between parties but within the Conservative Party. As a consequence, many voters have never felt more unrepresented or disempowered. Aided by an increasingly belligerent right-wing press, the Tory Brexiteers are monopolising and poisoning debate: as the novelist Ian McEwan said, “The air in my country is very foul.” Those who do not share their libertarian version of Brexit Britain are impugned as the “enemies” of democracy. Theresa May has a distinctive vision but will the libertarian right allow her the time and space to enact it?

Let us not forget that the Conservatives have a majority of just 15 or that Labour’s problems did not begin with Mr Corbyn’s leadership. However, his divisiveness and unpopularity have accelerated the party’s decline. Although the Unite general secretary, Len McCluskey, elected by a fraction of his union membership, loftily pronounced that the Labour leader had 15 months left to prove himself, the country cannot afford to wait that long.

Faced with the opposition’s weakness, some have advocated a “progressive alliance” to take on the Conservatives. Labour, the Liberal Democrats, the Greens and the nationalist parties are urged to set aside their tribalism. Yet it is fantasy to believe that such an alliance would provide stable majority government when nearly four million people voted for Ukip in 2015. There has also been chatter about the creation of a new centrist party – the Democrats, or, as Richard Dawkins writes on page 54, the European Party. Under our first-past-the-post electoral system, however, a new party would risk merely perpetuating the fragmentation of the opposition. If Labour is too weak to win, it is too strong to die.

The UK’s departure from the EU poses fundamental questions about the kind of country we wish to be. For some on the right, Brexit is a Trojan Horse to remake Britain as a low-tax, small-state utopia. Others aspire to a protectionist fortress of closed borders and closed minds. Mr Corbyn was re-elected by a landslide margin last summer. The Leave campaign’s victory was narrower yet similarly decisive. But these events are not an excuse for quietism. Labour must regain its historic role as the party of the labour interest. Labour’s purpose is not to serve the interests of a particular faction but to redress the power of capital for the common good. And it must have a leader capable of winning power.

If Labour’s best and brightest MPs are unwilling to serve in the shadow cabinet, they should use their freedom to challenge an under-scrutinised government and prove their worth. They should build cross-party alliances. They should evolve a transformative policy programme. They should think seriously about why there has been a post-liberal turn in our politics.

There is nothing inevitable about the right’s supremacy or a catastrophic Brexit. At present, the mood on the Labour benches is one of fatalism and passivity. This cannot go on.

This article first appeared in the 30 March 2017 issue of the New Statesman, Wanted: an opposition