No time to go wobbly

By ,

First the good news. Discussions seem to be moving forward between Canada and the US on a cap-and-trade system to put a limit on emissions and allow industry to buy and sell emissions rights.

But as the economy continues to slow down, everyone seems to be getting nervous about the negative consequences of cap-and-trade schemes. Understandable, sure.  Yet one has to wonder whether there ever will be a good time to consider the positive ones.

There are now reports out of Australia this week that its carbon trading plan needs rethinking, because of the burden imposed on businesses.  And there are similar concerns in Europe.  The European Roundtable of Industrialists recently sent a letter to the European Union Commission warning that the EU’s Emissions Trading Scheme (ETS) threatens to destroy the competitiveness of European industry.

Of course, there’s always another side to the story. In fact large European emitters are dumping their pollution permits (to emit a certain amount of GHG) on the market. Why? Because for many of them, industrial output has fallen so low that they don’t have to pollute as much. And since permits were mostly given out free when the ETS was set up, their sale allows firms to cash in while making few environmental sacrifices. The problem is that the sell-off is depressing the price of carbon, thereby making renewables projects less affordable.

The point of putting a price on carbon was to change behaviour (better achieved through a carbon tax, if you ask me), not save businesses from slipping into the red. Obviously we want a system that will allow business to thrive. But why should a downturn be reason enough to deter countries from making progress in curbing their emissions? First, let’s get the rules in place. The economics will then follow. Adjustment can be made afterwards.

Time to heed the words of the Iron Lady.