According to just released EU figures, CO2 emissions from industry sectors covered by the ETS have dropped by 11 percent over last year. This, we are told, is on top of a six percent fall the previous year, leaving industry users with a massive surplus of EU CO2 emission permits.
The effect is mainly due to the recession, although the increased use of gas rather than coal and fuel oil for electricity generation has contributed to the downturn in emissions.
Nevertheless, the power sector – the only one which actually has to pay for it permits – actually ran short, despite trimming 119 million tons of emissions, compared with the previous year, ending up having to buy 124 million tons from the market – costing electricity users about £1.5 billion.
That still left the heavy industry sectors, such as steel and cement production, with about 185 million tons of permits, or 30 percent more than they needed. These are valued at current prices at about £2.13 billion, given to them free under the EU system.
With little immediate demand for the extra, these firms can save their credits for an upturn in the economy, to offset against future emissions. That, much to the chagrin of the greenies, means that the way is clear for them to increase their emissions over current levels without incurring penalties.
This, of course, defeats the whole object of ETS which is supposed to drive industry emissions down, year on year, another brilliant "success" for our gifted Eurocrats, to add to their many others.
Clearly, they have missed a trick here as they should have given the scheme to the officials running the CFP – that would guarantee a shortage of permits (and the destruction of the industries needing them).
The real loser though will be the UN's clean development mechanism (CDM). With a surplus of European credits on the market, there will be very little call for certificates of dubious provenance, from grubby little third-world operators, except at a huge discount.
What will now happen, of course, is that for the next round of certificate giving, the EU will try to set a lower "cap", which will have all the industrialists threatening to offshore their production – which they are largely doing anyway, ending up in a token cut which satisfies no one.
Some of the greenies – and the money men – are setting their hopes on the EU upping its ante, from a 20 to a 30 percent cut in emissions on 1990 levels, but there is a long way to go before all member states will agree to an act of collective economic suicide. There are still some member states which seem not to have lost their will to live.
Without that, the ETS is likely to become ever-more irrelevant, although governments, industry and the money men are making far too much loot out of the system to want to abandon it. Thus, it will become – as it always has been – just another tax, hidden in our electricity bills, for the little people to pay.
T'was ever thus and will remain so until we rise up and slaughter our tormentors – a prospect which is becoming ever more attractive by the day.
COMMENT THREAD - CLIMATE CHANGE