LABOR IS poised to introduce a carbon price, starting with a tax that will morph into an emissions trading scheme (ETS) within three to five years. The model for Australian policy has largely been the experience of the flagship carbon trading scheme in the European Union. But it’s a model for climate disaster. A recent report by the campaign group Carbon Trade Watch shows that any idea carbon trading will reduce emissions is a joke.

In 2009, CSIRO economist Clive Spash wrote a devastating critique of the EU scheme and carbon trading. In “The Brave New World of Carbon Trading”, censored by the CSIRO, Spash showed how corporate power led to companies making a profit from selling permits while emissions rose—once Czech electricity giant, CEZ, made so much money trading permits that it was able to buy another coal-fired power station!
Defenders of carbon trading have maintained these were simply “teething problems” with the scheme and that these would be fixed in Phase 2, which began in 2008.
But a provisional analysis released in April by the EU Climate Commission shows that for industries covered by scheme, emissions rose by over 3.5 per cent in 2010.
Carbon Trade Watch’s report details how the use of international offsets has skyrocketed: “over 80 per cent of the offsets used to date come from industrial gas projects, which EU Climate Action Commissioner Connie Hedegaard admits have a ‘total lack of environmental integrity’.”
Just like Phase 1, Phase 2 has meant windfall profits for the polluters. By passing on to consumers the “cost” of permits they got for free, power companies made around €19 billion in windfall profits in Phase l. It is estimated they will make between €23 and €71 billion from Phase 2.
This has effectively been a subsidy to the energy industry. It has resulted in higher shareholder dividends for a rich elite, but hasn’t driven investment in renewable energy.
Teeside steelworks in the UK, which has been partially mothballed and recently cut 390 jobs, still managed to get 5.76 million surplus permits.
The ten EU steel plants with the largest amount of surplus permits made a combined windfall profit of around €650 million from the sale of those permits last year.
Phase 3 of the EU scheme is due to start in 2013 and the scheme’s backers are claiming it will fix the problems of the previous phases.
For instance there is supposed tighter control of “offsets”, but there will also be unlimited banking of permits from Phase 2 allowed. The use of surplus permits from Phase 2 means polluters don’t need to take any action domestically until 2017.
Portugal and Spain have reduced emissions by 15 per cent and 12 per cent respectively in 2011—but both countries have seen a substantial roll out of large scale solar and wind in recent years thanks to government support for renewable energy outside the EU scheme. Portugal has seen renewable energy increase by 28 per cent in the last five years, and it now contributes 48 per cent of total electricity generation.
Australia’s renewable energy figures have barely changed in the last decade. There has been some roll out of wind, but still no large scale solar power. Total renewable energy in Australia is around 8 per cent, most of which still comes from the Snowy Hydro Scheme. A carbon price won’t change that.
The EU emissions increases must give even the Greens pause, as they come under pressure to pass a carbon pricing scheme that gives every indication of being the CPRS 2.0. It will mean hand outs to big polluters, inadequate compensation for households, and token sums for renewable energy. The Greens were right to reject the CPRS the first time.
The latest EU figures show they should start fighting for direct investment in renewable energy.

Chris Breen

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