Carbon trading adding fuel to global warming row

POLITICIANS are battling it out over climate change at the G8 this week in Germany but it is becoming difficult to follow the twists and turns of this issue.

George W Bush muddied the waters even further with his apparent U-turn on the US intransigence over imposing limits to the amount of greenhouse gasses their industry can emit.

In fact the only U-turn he performed was in acknowledging that global warming is caused by human activity — something accepted by every other developed country for quite some time.

German Chancellor Angela Merkel gratefully accepted this move when he made his statement last week but left the US in no doubt that they were still not being helpful.

The battleground remains finding a way to get countries to co-operate. Up to now the debate has been largely polarised by the controversial EU carbon emissions trading scheme that the US has refused to be part of so far, despite many states and much of its industry adopting such a scheme.

But in the midst of all the spin, a team of European and US environmental economists has produced a report saying the scheme has been very successful so far and has reduced greenhouse gasses by about 7%, judging from an analysis of historical data and allowing for the growth in emissions that accompanies growth in GDP.

The experts describe emission trading as “by far the most significant accomplishment in climate policy to date”.

Introduced under the Kyoto Protocol it allows energy-intensive industrial plants and electric utilities to trade rights or allow-ances to emit CO2.

Each country submitted a list of their qualifying plants to the European Commission with allocations of CO2 they could emit. If they emitted any extra they would have to buy them from countries with a surplus.

The review said some member states appeared to receive over-generous allowances but even so the EU had succeeded in placing a price on CO2 that starts to reflect the scarce capacity of the earth’s atmosphere to absorb more greenhouse gas emissions.

Over the first two years of the scheme about €14.7 billion worth of emissions were traded at a price that remained much the same across countries with different economies, and extended beyond Europe.

The frequently embattled European Commission’s role was described as key to the scheme. They reduced the proposed number of allowances of 14 of the 25 member states by almost 100 million tonnes pa. Emissions exceeded allowances in only six of the EU countries, including in Ireland.

Some countries gave themselves too high an allowance and the commission intends to encourage further cuts by reducing the 2008–2012 allowances.

The review says the scheme is important because it has created the groundwork for a global system, shows that emissions trading works and will be hard to ignore in future climate negotiations.

But the real challenge now, they point out, is to extend carbon trading worldwide as the EU accounts for just 20% of global greenhouse gas emissions, and the trading scheme applies to just about half of this.

The Bush administration hopes to kick the idea into the long grass by refusing to deal with it at the G8 and offering to host a conference sometime next year. This however will be too late for the start of the post-Kyoto treaty in December in Bali.

In the end, no matter how strong the scientific evidence is and no matter how dire the possibly consequences may be, any change of direction needs political and economic backing.