Policy problems
Oilseed rape grown for 1st generation biofuel has limitations. Image credit: Richard Webb |
Indirect land use change (ILUC)
Need for a holistic approach in policy-making
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Cabot Institute for the Environment blog
A blog about environmental research at University of Bristol
Oilseed rape grown for 1st generation biofuel has limitations. Image credit: Richard Webb |
Image by Steve Jurvetson |
Extreme weather events will become more common |
Nuclear power could help decarbonise the UK |
We’re doing well to decarbonise our cars. Image by Danrok, Wikimedia Commons |
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It’s not news that the EU emissions trading system (EU-ETS) is in trouble. A build-up of surplus emission allowances has caused dangerous instability in the carbon market and a plunge in prices since the economic slump in 2008 began (See Figure 1, courtesy of David Hone).
Figure 1, courtesy of David Hone |
The discussion at the All Party Parliamentary Climate Change Group’s (APPCCG) meeting on the 28th of January centred on the causes and consequences of the EU-ETS allowance surplus. The majority of speakers at this session had a background in the discipline of economics, so inevitably the exchange of views was… frank. The panel were in agreement that EU-ETS is in crisis; but can and should it be saved?
Emissions trading schemes, of which EU-ETS is a canonical example, are an attempt to allow market forces to correct the so-called ‘market failure’ that is carbon emission. From the point of view of a classical economist, the participants in carbon emitting industries do not naturally feel the negative effects their activities cause to the environment. Emissions trading forces carbon emitters to ‘purchase’ the right to pollute on a market. In effect, they pay to receive permits (or allowances) to emit a certain level of emissions. If they do not reach this level of emission, the excess can be sold back onto the market, allowing others to make use of it. The prices of permits are determined by market forces, so cannot be fixed by the EU. The quantity of permits is within the control of the EU, and this is where the problem lies.
In the aftermath of the 2008 slump, a surplus of allowances began to build up, leading to a crash in the price of allowances. Many commentators blame EU economic forecasting for this problem, as the recession and consequent reduction in economic activity was not factored in to the EU-ETS control mechanism. Criticism has been forthcoming for the economic models used, and some go as far as to liken the mismanagement of EU-ETS to the ‘wine-lake and butter-mountain’ days of the 1980s, where the Common Agricultural policy was allowed to consume over 70% of the EU’s budget. Perhaps the models are too simple – James Cameron, a speaker at the APPCCG event, spoke of the ‘premium on simplicity’ that exists in creating policy. Maybe that approach has extended itself into the mathematical models used to predict the performance of EU-ETS, rendering them over-simplistic?
Personally, I see things a little differently. It’s clear that economic models are often far from perfect; however, I’m not sure that’s where the problem lies. In the implementation of policy, decision makers have to draw on the implications of many separate models; for instance, they must consider the GDP growth of EU member states, their adoption rate of new energy efficiency standards and the relative industrialisation of their economies. To my mind, the greatest source of error is in the gaps and interfaces between these economic models. Policy makers must make decisions on how to interpret the way economic predictions will interact with one another, and these interpretations are always subject to value judgements. What we need is a more joined-up approach.
Climate science has long used ‘macro-models’ to incorporate a variety of physical processes into their predictions, an approach that could be adopted by economists as well. While the first economic macro-models may not achieve even a fraction of the accuracy of climate models, that is not to say they cannot be improved through collaboration and quantitative criticism. Perhaps now is the time to make a start?
Blog post by Karen Bell, Bristol School for Policy Studies
The All Party Parliamentary Climate Change Group (APPCCG) is a coalition of 150 MPs from all parties, as well as almost 200 representatives of a variety of businesses, NGOs, academic institutions, and embassies. Its registered aim is ‘To raise awareness of the threat of climate change and to promote policies to counter that threat’ (Register of All Party Groups, 2012). This involves discussing the practical strategies, at national and international level, for enabling the UK and the rest of the world to mitigate and adapt to climate change. The current Chair of the Committee is the Labour parliamentarian, Joan Walley MP, who also heads the Environmental Audit Committee. The Secretariat of the APPCCG is the Carbon Neutral Company, a business which has ‘…pioneered the carbon offset industry’ (Carbon Neutral Company, 2012).
On 11th September 2011, I attended an important meeting of this group on behalf of the Cabot Institute. The meeting began with Joan Walley MP explaining the importance of the meeting, in terms of contributing to the upcoming 18th session of the Conference of the Parties to the UNFCCC (United Nations Framework Convention on Climate Change) at Doha. She said that, in the past, the APPCCG had identified disconnects between policy, business and government and that it was necessary to look at how to close these gaps. She asked us to consider how the aspiration to be ‘the greenest government ever’ was reflected in our policies. Following this, she introduced the panel: Gregory Barker MP, DECC Minister; Mark Simmonds MP, newly appointed Parliamentary Under Secretary of State at the Foreign & Commonwealth Office; Ruth Davis, Senior Policy Advisor to Greenpeace UK; Pete Betts, Director, International Climate Change, DECC; and Mark Kenber, Chief Executive Officer of the Climate Group, a non-profit organisation.
Ruth Davis of Greenpeace, the first speaker, emphasised that climate change has structural causes and so international climate change negotiations are complex and need to be carried out over a long time period. She spoke of the necessity for cross party consensus so that policy remains consistent over time.
DECC Minister, Gregory Barker MP, said that, despite the difficulties in previous climate change negotiations, there was still a glimmer of hope for the upcoming Doha talks. He said he considered the UNFCCC process was our best chance to deliver a global agreement by working towards a single, legally binding instrument to control climate change. Praising Pete Bett’s negotiating skills, he remarked how difficult these meetings were, not only because of the influence of geo-politics, but also individual egos. However, he felt that the UK was held in very high esteem because of its role in the negotiations and was hopeful because, at the last major UNFCCC talks in Durban we ‘agreed to agree’ that there should be a global treaty by 2015. However, he was concerned about the rift between developed and developing countries on these issues. He spoke of the 100 billion dollars promised for adaptation and mitigation, stating that this should not be seen as a grant since some of this money would be a result of developing countries mobilising private sector capital. Further, he considered that the transition to a low carbon economy should be seen as an opportunity and a spur to growth and innovation.
Mark Simmonds, MP, then went on to say that the Foreign and Commonwealth Office was a significant player in bringing forward the climate change agenda around the world. He considered that it was important to explain to developing countries that a low carbon economy can go alongside economic growth. Supporting Greg Barker, MP’s view, he stated that the need to reduce emissions was an opportunity for UK business to help developing countries to transition, by exporting innovation, expertise and finance. He said that the UK had been leaders in inspiring other countries. For example the Mexican government had put in place a climate change act modelled on that of the UK and South Korea’s emissions trading scheme is a result of significant UK input.
Peter Betts emphasised that the window of opportunity to ensure global warming is kept to below 2 degrees (2C) is getting smaller. This target was agreed at the 2010 Copenhagen UNFCCC talks in order to avoid runaway, and potentially devastating, climate change. Peter Betts considered that the 2C goal was a ‘sensitive issue’ for China and ‘China is doing a lot but the numbers suggest they would need to almost do more than anyone else to meet that goal’. He also stated that it was proving a challenge to mobilise private finance to help reduce climate change.
Mark Kenber said there was huge enthusiasm about what could be achieved at the COP meetings but that negotiations continue to focus on cost. The situation must be seen as an opportunity for business.
After the panel had spoken, there was little time left for contributions from the other seventy or more attendees. Four comments/questions made were in the remaining time:
The panel replied to these comments by saying it would not be practical to introduce consumption based accounting; that we ‘want to get into emissions trading’; and that we need to persuade developing societies that growth economic and environmental protection were mutually reinforcing.
I did not contribute to the discussion, partly because there was so little time for comments from the floor, but mainly because my own opinions about the practical solutions to climate change are so completely different to those expressed that I could not see how I could begin to make a case within the one or two sentences that appeared permissible. I found the emphasis on market solutions; ‘persuading’ developing countries; the dependence on private enterprise to find emissions reduction a profitable enterprise; and the insistence on the need to continue to pursue growth, ideas that are both disturbing and difficult to confront (being the dominant discourse in the UK). Continuing growth is not sensible, or even possible, because resources, in particular fossil fuels, are unlikely to last another 100 years and the capacity of the environment to cope with our waste is also reaching its limits. Most of the panel members seemed intent on promoting climate catastrophe as a business opportunity, so increasing the focus on technical and market-based solutions. Many of these ‘solutions’ have proved ineffective and/or potentially very harmful e.g. emissions trading, geo-engineering and nuclear power The kind of policies that might actually help in the current situation where not mentioned or dismissed outright e.g. reduced consumption by the world’s wealthy; large financial transfers from North to South in order to finance adaptation and mitigation costs; safe, clean and community-led renewable energy; resource conservation that enforces Indigenous land rights; organic and sustainable agriculture; free public transport; and food sovereignty. Further elaboration of these points can be found in my articles and conference papers, e.g. http://montreal.degrowth.org/downloads/papers/S018_Bell.pdf
Though frustrating, it is important for those of us who are interested in socially and environmentally just solutions to the problem of climate change to continue to engage in these events. We need to increase awareness of how damaging bogus strategies can be, and continue to propose a genuine project to increase the well-being of all.