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What You Absolutely Need to Know
• Carbon Trading Scheme CANNOT ACHIEVE Carbon reduction goals—Means not commensurate with the ends.
• Europe has achieved carbon reduction since base year 1990, but NOT because of any climate change policy.
• Recent studies commissioned by EU demonstrate that even the modest carbon trading scheme of today will have serious economic consequences.
• Carbon reductions in Europe will probably result in increased carbon emissions elsewhere as economic activity moves.
• System as it exists today is based upon political allocation/economic inefficiency, NOT reduction in carbon.
What You Absolutely Need to Know
Point 1: Cannot Achieve Goals• The goal set by political leaders in Europe and by
President Obama is to reduce CO2 emissions by 80% in 2050.
• Current Carbon trading scheme covers ~10,000 point sources of emissions, which emit 40% of CO2 in Europe.
• 100% reduction in these sources=40% reduction in carbon, or half of goal. As these sources are industrial and power plants, obviously they will continue to emit substantial carbon.
Point 1: Cannot Achieve Goals• Ergo the carbon trading scheme is only the
first tentative step in plan to reduce CO2
• The main thrust of carbon reduction plan has just begun to be discussed: carbon taxes that will directly impact consumers and transportation industries.
Point 1: Cannot Achieve Goals
TAKEAWAY: CARBON TRADING SCHEME IS NOT
A VIABLE MECHANISM TO ACHIEVE GREENHOUSE GAS
REDUCTION GOALS;IT IS CAMEL’S NOSE UNDER TENT
Point 2: CO2 Reductions Due to Economy
• Europe HAS seen carbon reductions since 1990—Kyoto base year.
• Pretty much all of that reduction took place in 1990s, not because of carbon trading scheme which began this decade.
• Years in which reduction took place: early 90’s and 2008 primarily.
Point 2: CO2 Reductions Due to Economy
• Why have EU CO2 reductions taken place?
• THE LARGEST SINGLE CONTRIBUTOR TO CO2 REDUCTIONS WAS THE COLLAPSE OF COMMUNISM AND THE RETIREMENT OF INEFFICIENT EAST GERMAN FACTORIES.
Point 2: CO2 Reductions Due to Economy
•EU Carbon Trading Scheme was set in motion in 2003, long after reductions were made. Trading began in 2005
Point 2: CO2 Reductions Due to Economy
• Emissions again went down considerably (6%) in 2008, after rising during much of the trading period.
• 2008, of course, is when the full-blown economic crisis began to hit. Industrial production plummeted.
Point 2: CO2 Reductions Due to Economy
TAKEAWAY: Carbon trading has had little or
nothing to do with Greenhouse Gas reductions.
THE BEST WAY TO REDUCE GREENHOUSE GASES IS TO HOBBLE
THE ECONOMY.
Point 3: Carbon Trading Scheme Projected to Harm Economy
• Unsurprisingly recent studies show that forced reductions in CO2 emissions will harm EU economy.
• Some economic sectors disproportionately hurt, especially heavy industry.
• Power generation companies unlikely to be directly hurt, as they pass on costs to consumers.
Point 4: Carbon Trading Scheme Displaces Production, Unlikely to Reduce Emissions
• Carbon Trading Scheme, or rather adding a cost to carbon use, is likely to displace economic activity to regions with less stringent regulation.
• Quite likely to accelerate trend to de-Industrialization of 1st world, moving activity overseas.
Point 4: Carbon Trading Scheme Displaces Production, Unlikely to Reduce Emissions
• Developing world less environmentally conscious. You do the math.
• This phenomenon is called Carbon “leakage,” where carbon emission is not actually reduced, just moved.
Point 4: Carbon Trading Scheme Displaces Production, Unlikely to Reduce Emissions
TAKEAWAY: EU or Developed World Carbon
Trading Schemes or other mechanisms to reduce Greenhouse Gas Emissions very unlikely to work
as planned. Instead they will de-industrialize the Developed World.
Point 5: Carbon Trading Scheme Actually Based on Political Spoils System, Not Economics
• Carbon trading scheme is promoted as a means to bring market forces to bear with the goal of reducing CO2 emissions.
• Actual practice shows what should be obvious with any massive government program: it is a spoils system that transfers wealth from the less powerful to the more powerful.
Point 5: Carbon Trading Scheme Actually Based on Political Spoils System, Not Economics
• How it works: permits given away for free, then traded on the open market.
• In other words, there is huge economic benefit to getting more permits than necessary. Huge costs associated with getting fewer than necessary.
Point 5: Carbon Trading Scheme Actually Based on Political Spoils System, Not Economics
• Under current system some companies have experienced huge windfalls, as they have raised prices to consumers AND sold their excess permits.
• Other companies have of course suffered greatly, as their allocation of permits was insufficient to meet their needs.
Point 5: Carbon Trading Scheme Actually Based on Political Spoils System, Not Economics
TAKEAWAY:It is a basic fact of political/economic life
that when resources are distributed based upon the exercise of power, then the powerful will benefit at the expense
of the less powerful.
Point 6: Carbon Trading Creates Inefficiencies
• In practice the price of carbon permits has varied wildly, by more than 400%.
• Huge variations in price further increase the costs of production in developed world, as industry cannot plan adequately for the cost of their inputs.
TAKEAWAY:• Carbon Trading can’t achieve its goals• Carbon costs will harm the economy• West will de-industrialize as carbon intensive
industries move to developing world• Carbon trading has created a spoils system
where wealth is transferred from the less powerful to the more powerful
• The only way to achieve greatly reduced carbon emissions with current technology is to crush the economy.