A free-market energy blog
Random header image... Refresh for more!

Category — EU cap-and-trade

EU Climate Policy Update: Italy Rethinks Kyoto

Another breach in the badly aging Kyoto wall has been opened.

After the failure of the Copenhagen meeting, the Italian Senate passed a motion calling for a re-assessment of European Union climate policies as well as a review of the IPCC process. The motion, presented by Sen. Antonio D’Alì (chairman of the Environment Committee) and Sen. Guido Possa (chairman of the Education Committee) as well as many other Senators, is a powerful sign of wide and growing dissent in many EU member states.

The EU is the largest economy to have ratified the Kyoto Protocol, under which it is committed to cut its greenhouse gas (GHG) emissions to 8% below 1990 levels in 2008-12. The EU has subsequently adopted a package of directives, the so-called “20-20-20,” that mandates a 20% reduction of GHG emissions below 1990 levels by 2020 and that 20% of total energy consumption will be provided by renewable sources, with a non-mandatory target of a 20% increase in energy efficiency.

In order to achieve such ambitious goals, Europe has created a large cap and trade program, called the Emissions Trading Scheme (ETS), under which over 12,000 industrial installations are required to surrender an amount of emission allowances high enough to cover their own annual emissions. Extra allowances can be bought and sold on the market. Theoretically, such a mechanism is supposed to create incentives for businesses to invest in clean technologies, reducing emissions through an economically efficient process.

Despite the political success of cap and trade – easily sold to voters as a means to force “big business” to pay for the pollution that they supposedly cause – cap and trade is often criticized, even by mainstream economists, as inefficient and ineffective.  The costs, it is argued, outweigh the benefits. [Read more →]

May 1, 2010   1 Comment

The Expensive Failure of Europe’s Emissions Trading Scheme: A Summary

The European Union Emissions Trading Scheme (ETS) is currently the largest cap-and-trade scheme in the world. Covering 11,500 installations and countries with a combined population of around 500 million, the scope of the scheme is truly enormous. Before Americans adopt a cap-and-trade scheme of their own, it is vital that they take a serious look at how things have gone in Europe. I hope that my study, released at the end of last week, can demonstrate some of the huge risks that the United States will face if cap-and-trade advocates get their way.

The first thing to note is that the scheme has cost European consumers a fortune. There was a total bill of €93 ($123) billion between the introduction of the scheme in January 2005 and the end of 2008. That is €185 ($245) for every man, woman, and child across an area where average incomes are considerably lower than they are in the United States. That bill is expected to rise in the years to come.

And the people who pay the heaviest price are those least able to bear it. A large part of the bill to consumers will come through higher prices for electricity. When you combine the ETS with other policies, such as renewable energy mandates, which may well form part of a cap-and-trade bill, they amount to 14 per cent of household electricity bills in the U.K. That will be felt most by the poor and elderly. By contrast, [Read more →]

November 3, 2009   2 Comments