Emissions Impossible

AP Photo
Good Morning, your mission, should you accept it, is to aid the implementation of the Kyoto Climate Change Treaty by the trading of emission credits. This market, if implemented will be the first wave of mitigation strategies in an ocean of mitigation techniques and strategies that the world will need to undertake.

Here is a story from the Guardian about today's chaos in the carbon market.

Emissions impossible
by Michael Grubb

The world's carbon market is about to collapse, but never mind: the whole thing needs restructuring anyway.

The global carbon market is in chaos. In the world's boldest bid to tackle climate change, the EU Emissions Trading System (ETS) was launched in 2005 to cap carbon emissions from industry. Companies were allocated allowances to emit CO2 and permitted to trade them.

A real and important market was thus established that gave value to reducing emissions.

The price of these allowances rose higher than expected and stayed that way for almost a year, but a couple of weeks ago it began to tumble; today it could collapse further - maybe to something close to zero.

A market worth tens of billions of euros annually, and the centrepiece of European climate change policy, seems to be melting before our eyes.

Putting a price on carbon was not just a European achievement: it had global significance. If companies find it too costly to reduce their own emissions, they can buy emissions credits from projects that reduce emissions in developing countries - and a flood of such projects started coming forward in response.

Now that tide - and with it the north-south deal that underpinned the global Kyoto treaty - seems in jeopardy. Those involved are wringing their hands and talking of disaster.

But they are wrong: the carbon market collapse has in fact come just in time.

(snip)

Three basic factors explain the debacle. First, business, like the rest of humanity, tends towards optimism. No business sets out its stall based upon pessimism, contraction, or projected failure: it is competition that sifts out the over-confident and the over-extended. Second, linking allocations to projected needs created a massive incentive for businesses to inflate forecasts. And third, business assumptions that cutting emissions would take time and capital underestimated the scope for some basic housekeeping measures.

(snip)

The governments of Angela Merkel, Tony Blair and many others around Europe have been sleepwalking towards a fiasco. Despite all their rhetoric about the importance of tackling climate change, the allocation plans are the test of whether they mean it. And from first impressions these may jeopardise the cornerstone of European and global efforts to tackle climate change.

Governments are supposed to submit their final allocation proposals to the European commission on June 30. They must learn the lesson from the wake-up call of the current collapse, and learn it fast.

(snip)

Today, the carbon market as we knew it will die.

Long live the carbon market. "

There is a great deal more in this article that shows what a carbon constrained world view will ultimately include. The positive side of the story is that is shows that the civilized developed world is trying to take climate change mitigation seriously.

The unfortunate side of the story is this,

We will not be able to curtail dangerous anthropogenic climate change by doing a little tummy tuck here and a little liposuction there. We will have to completely change our diet and our rather silly ways of living, as well as our antiquated business models which presume that our finite resources will always be inexpensive and that the environment can be degraded with impunity.

Neither is true.

These real changes will not come until we realize just how far gone our climate is. Real changes, like the way we drive to work, or for that matter work at all, will only come when our enlightened minds begin to throw off the myths of the past. Real changes, where we thoroughly revisit the foundation of our economic house, will come once we fully understand the challenge and the buried blessing of the uncharted future we have made for ourselves.

Curbing Climate Change with trading programs is

fighting the tide with a cane.



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