Why have Tory MEPs rejected a free market solution to climate change?

By sabotaging reform of the EU Emissions Trading Scheme, Conservative MEPs have shown that they can't be relied upon to champion British interests in Europe.

It may surprise some on the centre left but there is nothing innate to conservatism that makes it less able to take pragmatic decisions in favour of sensible environmental policy. It has had a refreshing ability to acknowledge the intrinsic value of nature and stewardship even if it has become more conflicted about the means to deliver these outcomes. It is a broad church that spans from the one nation Heseltines to the radical free marketeers like John Redwood. But if there is one thing that unites them, it’s the belief that markets offer most of the answers. Which is why it is so baffling that Conservative MEPs voted down a measure that might have kept the European Emissions Trading Scheme alive. Trading is not the only way of tackling emissions but it’s the poster child of free market thinkers because it promises an economically efficient, non-regulatory solution to a giant supranational problem.

The back story is that, on Tuesday, the EU parliament voted against a minor technocratic fix that would have rescued the floundering European carbon market, which is struggling under the weight of too many pollution permits in the system. The fix would have involved 'backloading' the sale of some excess carbon allowances to 2019, so the number of allowances in the system would be reduced, increasing the price which has dropped as low as €3 per tonne of carbon in recent months. While more profound reform is required, it would have been a first step to putting the mechanism back on track. The vote failed by 19 votes. Twenty Conservative MEPs voted against it. In doing so, they failed their constituents and UK business.

A strong carbon price across Europe is directly in the UK’s interest. Its main benefit is to provide financial incentives for switching from coal to gas, with the costs being born by coal heavy countries like Poland and Germany and rewards flowing to those that have already made the switch, like the UK. One of  Thatcher’s less controversial legacies is an energy system which has less and less coal and a relatively high proportion of gas, so UK generators and fuel suppliers stood to gain significantly from the EU carbon market fix. By voting against it, Conservative MEPs have rewarded coal at the expense of gas and Germany at the expense of the UK. This will be the first of many negative consequences arising from the failure of EU emissions trading. At our Chancellor’s insistence, the government has also introduced a carbon price floor, which means we are paying higher carbon prices than our neighbours. It creates an attractive revenue stream for the Treasury but many British businesses will now feel aggrieved that it could now be at least a decade before there is a single carbon price across Europe.

This is part of a pattern of conflicting behaviour from different parts of the Conservative Party that should worry its leaders. There is no evidence that the British public sees climate or environment as a partisan issue. It is a 'valence' issue, like national security, in which voters expect any party of government to be competent.

Emissions trading may be too obscure for the public to notice but experts in business, NGOs and academia do and,  for many, this will be another worrying sign that the Conservatives are struggling to govern coherently on one of the big issues of our age. We’ve already seen this confusion with the Energy Bill, where the Chancellor agreed to spend £7.6bn a year on new low carbon energy (mostly renewables) but then opposed a decarbonisation objective for 2030 which would have ensured that much of the equipment required would have been built in new UK turbine factories.

The debate now moves on to what 2030 climate package the EU should adopt. The UK should be at the heart of the debate, fighting for an ambitious carbon goal that matches our own. But the prime minister has yet to get his ministers to agree a common position. Whether or not the British government takes a lead, the EU will adopt a new climate package at some point in the next 18 months under pressure from France and Germany. Yesterday’s action by Conservative MEPs has made it more likely that it will be focused on fiscal and regulatory measures, and less on trading. That may turn out to be a good thing, but Conservative MEPs have just shot themselves in the foot by making market trading solutions less attractive. They have also made it considerably more difficult for David Cameron to demonstrate that his party has championed British interests in energy and climate change effectively.

Matthew Spencer is director of Green Alliance

Exhaust rises from cooling towers at the Niederaussem coal-fired power station at Bergheim near Aachen, Germany. Photograph: Getty Images.
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After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.