Monday, November 15, 2010

Free licences to pollute in Cancún?

Deepwater Horizon. It is an uncannily beautiful name for an oil rig that will be forever synonymous with disaster. A little over six months have passed since the BP facility exploded, killing 11 workers and causing incalculable ecological damage along America’s Gulf Coast. Now that the oil has “vanished” from the sea’s surface – with the aid of Corexit, a dispersant so toxic that it is banned in Europe – the world’s press have for the most part vanished, too. Just occasionally someone who can see beyond the vacuous confines of 24-hour-news cycles grasps that we cannot simply move on from this event. “The scars on the fragile desert of south-eastern Utah, from endless road cuts to the sheared oil patches themselves, will take decades to heal,” writes Terry Tempest Williams in the current issue of Orion magazine. “These are self-inflicted wounds made by a lethal economic system running in overdrive.”

In a fortnight’s time, the world’s climate negotiators will meet in Cancún. Will the sight of dolphins swimming in a turquoise-tinted Caribbean make them realise that our wondrous planet should never have been sacrificed to market forces? Based on all indications to date, the likelihood of such an epiphany appears to be zero.

One major reason why Cancún will fail to deliver a robust agreement is that the polluters are dictating policy. Barack Obama stated – unconvincingly – in June that he was considering “whose ass to kick” over the oil spill. Yet if Washington’s love affair with energy giants was temporarily soured around that time, there was no similar falling out in Brussels.

Among the main objectives for the European Union’s team in Cancún is to convince others to ape its emissions trading system (ETS). That scheme for selling permits to foul up the atmosphere was in large measure designed by BP.

Back in 1997, BP’s then chief executive John Browne was touting the concept of emissions trading as a “business-friendly” way of tackling climate change. The company then set up an internal ETS in 1999, under which its operations were given a yearly emissions threshold and encouraged to buy and sell pollution licenses between them. This experience showed that the “basic idea could work on a wider canvas,” Charles Nicholson, a senior BP representative, said in 2003.

It is now clear that the basic idea has not worked. During the first phase of the EU’s scheme – which kicked off in 2005 - a number of power companies reaped windfall profits by selling unused permits that they had been given free of charge. The European Commission indicated it would rectify the flaws, yet instead it did everything to placate a small club of energy-guzzling industries.

BP had a role in preserving the defects. When the Commission was considering some changes to the scheme, it drafted a recommendation to make oil refineries pay for their ETS allowances through auctioning. Pressure exerted by BP and similar firms meant the relevant clause was removed from the final proposal – published in 2008 - with the result that refineries would get these permits for nothing.

If the ETS is genuinely supposed to bring down emissions, then its track record is abysmal. Between 2005 and 2007, the ceiling on emissions set by the scheme was 2,298 million tonnes of carbon dioxide (CO2) – more than 8% above verified emission levels for 2005. This meant that firms were able to increase their emissions or to save unused permits so that they could pollute at a later date.

Corporate interests have similarly prevented tough targets from being set for the second phase of the scheme, which runs from 2008 and 2012. Across the EU, the average ceiling is 2% lower than 2005 emissions. But a recent study by Friends of the Earth illustrated that the 2012 caps established for 17 EU countries – including Britain, France and Poland – are higher than emission levels for 2005.

Last week the environmental consultants CE Delft published a separate report predicting that the situation will not improve in phrase three of the scheme. Starting in 2013, that phrase will theoretically see 50% of emissions being covered licenses that are sold by auctioning. In practice, loopholes applying to energy-intensive industries will lead to only 90% of emission permits for such activities as cement-making remaining free. The CE Delft study, therefore, indicates that the ETS will not drive down emissions but remain a money-spinner for top polluters.

Sob stories from these polluters would have us believe that they will be forced to leave Europe if environmental rules are strengthened. They are playing the same game in the US. ArcelorMittal, the steel company headed by Britain’s richest man Lakshmi Mittal, has not only pressurised the EU into giving him free emissions permits, it has been heavily lobbying Congress to block climate legislation.

Jos Delbeke, a high-ranking European Commission official, has been in China lately to advise its authorities lately about how the ETS works. With the EU’s scheme about as useful as a chocolate fireguard, it is hard to see why he is in any position to recommend that it should be replicated in Beijng. But that is what he appears to be doing.

There is an even more fundamental problem with emissions trading. By relying on it so heavily, the EU is showing blind faith in a dubious market instrument. This scheme doesn’t punish the polluter. It rewards him for keeping a lethal economic system in overdrive.

·First published by New Europe (, 14-20 November 2010

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