21 April 2013

State of the EU ETS

Over at the Lowy Interpreter I have a guest post up on the current state of the European Union's Emissions Trading Scheme in the aftermath of the EU parliament's decision not to prop up the program last week. I discuss the ETS and offer a few thoughts on the state of Australia's climate policy debates, where it looks like Julia Gillard and Tony Abbott are working together (what?!).

Here is how it starts:
Last week, in a surprise to many, the European parliament defeated a proposal to postpone the auctioning of emissions permits, a move that would have propped up prices in the bloc's carbon market, known as the EU Emissions Trading Scheme or ETS. The market reaction was quick and brutal, with the price of carbon allowances falling by more than 30%. The political reaction was similar — the Wall Street Journal wrote that the vote was the 'equivalent of the pope renouncing celibacy'.
Head over to Lowy for the rest, and feel free to come back here and tell me what you think.



  1. “…current state of the European Union's Emissions Trading Scheme....”.

    All “schemes” fail. Merely some take longer than others.

  2. As you said in Climate Fix the economy always wins. Where i often part with you is in the last paragraph. I fail to see where this new alternative technology will come from? I certainly can foresee large opportunity in efficiency e.g. Steam turbine power plants operate at less than 40% of heat to work. This doesn't get you zero emissions though. That aside there is a good article in a recent Economist about the EU's smoke and mirrors on emissions

  3. The analogies proposed are quite funny.

    Odds are running high that some Pope will, in fact, revoke celibacy for the priesthood quite soon. If they want to have a church within the next generation, it is what they will have to do.

    Likewise the loss of European branding reminds me of nothing so much as Beyond Petroleums' latest sell off of wind power. Leaving it very Basically Petroleum again. Branding shouldn't stand in the way of economics, and the directors of BP know that. It's a shame more European politicians don't.

  4. The forum for emissions trading deals are the global climate conferences.

    Let's trace the history of carbon trading.

    Enron FAIL
    US Senate Kyoto 95-0 FAIL
    Copenhagen FAIL
    Doha FAIL
    Chicago Carbon Exchange FAIL
    European Trading Scheme FAIL

    Is there a pattern emerging ?

  5. You talk about the decarbonisation of economies and in that sense the German Energiewende is the most important experiment.

    I have followed the pricing of electricity in Europe - I live there - and those familiar with the subject know that occasionally when the wind is blowing and the sun is shining, electricity spot prices fall close to zero or even turn negative in Denmark or Germany. This is because solar and wind energy have a right of way and other forms of production are shut down.

    The effect of subsidized wind and solar is to push wholesale electricity prices down at unpredictable times. This has led to a situation where gas generation in Germany has become unprofitable, also pumped hydro storage is heading that way. As wind and solar proponents have jubilantly pointed out, new nuclear power cannot survive in such an environment. Witness the price guarantees nuclear companies in Britain demand for potential new power plants.

    Nevertheless, the intermittency of wind and solar require backup power that can kick in in a matter of hours. Nuclear can't do it and only Scandinavia has hydro on a large scale. Fossil fuel plants can do it but the price of power produced by plants that are regularly idled is much higher than in base load plants.

    What will happen when wind and solar energy are doubled in Germany? Right now the combined solar and wind annual TWh hour production is less than production by the remaining nuclear plants. If they are shut down on schedule, wind and solar have take up the slack. Old coal power shutdown will begin by 2016. Bioenergy can hardly be increased. Electricity prices at 22 eurocents/kWh are already second highest in Europe and renewable subsidies run at 18 billion in 2012 and are set to increase. Fracking is banned and new nuclear out.

    Combine that with a stagnant economy and it will get interesting.

  6. The European Union also introduced a carbon tax for aviation fuel.

    Obama Vetoes a Carbon Tax—in Europe

    President Obama has said he's going to continue his crusade against carbon energy in a second term, and we believe him. Yet there he was Tuesday signing a bipartisan bill shielding U.S. airlines from paying a carbon tax merely for flying to Europe.

    The European Union imposed its scheme to tax foreign airlines this year in one of its aren't-we-virtuous climate change gestures.


    however ...

    Airlines turn profit from EU freeze on carbon tax: environmentalists

    BRUSSELS — Airlines made up to half a billion euros in windfall profits last year by passing on a carbon surcharge to travellers despite an EU decision to freeze its controversial carbon tax, environmentalists said on Tuesday.

    Green group Transport and Environment said airlines chalked up extra revenues estimated at 486 million euros ($650 million) even though EU climate commissioner Connie Hedegaard in November decided to "stop the clock" on an EU carbon tax angering the global aviation industry.


    LOL !!

  7. As you said in Climate Fix the economy always wins. Where i often part with you is in the last paragraph. I fail to see where this new alternative technology will come from?

    Per this graph, photovoltaics in 2008 were about 3 dollars per peak watt, and going down by a factor of 2 every decade (i.e., about 7 percent per year).


    Continuing at that rate, within 2-4 decades, photovoltaics will be cheaper than any other form of electrical generation.