By Rory Tingle
The failure of the European Parliament to pass through legislation to bolster the EU’s ailing carbon trading market represents a devastating setback to green energy industries in the continent.
Last week, members narrowly voted against a plan by 334 votes to 315 to reduce the huge surplus of carbon allowances currently being traded under the Emissions Trading Scheme (ETS), with rebel Tory MPs ignoring government advice due to fears about manipulating the market in difficult economic times.
The concept behind carbon trading is clear – carbon dioxide emitted by businesses is capped and a market and price for carbon allowances is created. The current issue with the ETS is one of simple economics; the excess of allowances has caused the price of carbon to tumble to less than 5 euros per tonne, reducing the attractiveness of low carbon investments.
The proposed solution, known in EU gobbledygook as “backloading”, was to withhold 900 million allowances from the market for the next two years, producing the scarcity necessary to drive up prices.
The failure to enact this vital legislation is a devastating blow for carbon markets in Europe. Richard Gledhill, a specialist in climate policy at PwC, explained the issue in an article on the Guardian website: “Emissions trading can be a very effective policy tool to drive down emissions, but only if it is backed by political commitment to action.”
Commitment is something some politicians seem unwilling to provide, as they look ahead in awestruck expectation to the UN climate conference in 2015 – the event that will be so glorious that it would be seen as churlish to suggest that we need to take action NOW.
No need to panic though, as everyone’s favourite eco-warriors are firmly up to date with the agenda; vote for UKIP for a swift repeal of the UK Climate Change Act – as outlined in the environment section of his 2010 manifesto – and you even get a full ban on schools using global warming “propaganda” on the side… oh, stop it Nigel!
And all at a time when a new report, Unburnable Carbon 2013, showed that stock markets worldwide are valuing energy companies’ reserves of fossil fuels as if they will all be burned. This is despite evidence that only a third of the earth’s known fossil fuels can be used if we are to avoid a catastrophic 2°C rise in global temperatures this century.
A sign of over-speculation or evidence that the world has ceased to care about climate change? Only time will tell, although the vast amount of money being spent on locating fresh reserves of fossil fuels may point towards the latter.
The failure of a significant number of Tory MEPs to take action on the issue also casts serious doubt on the Coalition’s green credentials. David Cameron may be supportive of efforts to cut emissions, but we are yet to see whether the green agenda emanating from Number 10 will ever catch on among the Tory rank-and-file.
It is only a matter of time before politicians are forced to take action on climate change. The issue is, we don’t have much to play with.