PER 2015
government intervention and if speculators hoard permits and the auctions aren’t correctly controlled the whole concept could collapse. Despite these risks the concept has endured. Concerns have been raised that cap and trade is a hidden tax where the price firms pay for permits is passed on to customers. But the experiment was successful enough for Europe to follow suit. During the second phase of the ETS(2008-2012) 4% of permits were auctioned. A cautious move, but in 2013 the ETS decided to bump that up to 30%, buoyed by the revenue the auctions made. Now with a profit incentive for governments, there was less resistance to imposing the scheme on key industries which had previously held the scheme back in certain countries.
Concerns were raised in California that the scheme wasn’t doing much to combat climate change and was merely being used by the government as a way to pay off its debts. However in 2011 Bloomberg predicted European emissions are set for a sharp fall in 2015 up until the 2020 deadline year. It’s difficult to predict exactly how much the cap and trade scheme is causing that. And governments have tried to reassure sceptics, for example in Europe all countries are required to directly reinvest 50% of auction revenues for climate change
purposes.
Carbon Leakage
Carbon Leakage is a fancy term for when companies pack their bags and make a run for it to escape increased production costs brought about by cap and trade. In order to stop this the European Commission has passed a second list which will be in effect from 2015-2019. The list ensures that companies who have lots of international trade and who are vulnerable to increased production costs are put on the “At risk of ditching the EU list”, at which point they are given special treatment such as free pollution permits instead of sold by auction. Because of the enormous surplus of permits their price hasn’t hurt many industries’ costs, therefore the ETS hasn’t had much “leakage”. However some claim the United Nations has been behaving badly with its Clean Development Mechanism(CDM). Basically this scheme allows businesses in developed countries to get permits to produce extra greenhouse gas emissions, in exchange the business must invest in a clean energy system in an underdeveloped country. If regulated properly this would have a carbon neutral effect, but it isn’t regulated properly and western businesses have reaped the rewards. The Western Sahara people aren’t best pleased either because their occupiers the Moroccans have become rich from development projects.
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