Carbon Tax News

In this post, I told you how the Chinese are kicking up about the EU's new ruling that all flights in Europe would be subject to a carbon tax (The ETS).

Well the Chinese and 22 other disgruntled nations (including the US and Russia) met in Moscow on the 23rd February to discuss possible joint action. There are fears that all this could deteriorate into a full-blown trade war, all over a couple of extra dollars/pounds per passenger! The participants keep whining on about how the EU were wrong to go it alone when a global agreement was being negotiated. The EU say they've lost patience with that, seeing as it's been going on for 14 years now, but they're perfectly ready to drop their scheme in favour of a worldwide one...

The EU is holding firm, for now.

The ETS is getting the steel industry angry as well but for other reasons. The EU has finally realised that the economic downturn has undermined it's carbon trading scheme: The idea behind the scheme is that companies are given emission credits which allow them to emit to a certain level or cap. After which they have to buy further credits. On the other hand, if they don't use all their credits, they can sell them. That's the basis of the scheme, if you stay within limits, you pay nothing (or can even make money). If you go over, you pay. The idea is that companies will try to reduce their emissions to avoid these extra costs. That is, if the credits cost enough.

Unfortunately, that cost is set by the market i.e They're traded. Thanks to the recession, many companies are meeting their emissions caps with ease so the market is awash with them, forcing the price down. So there's less incentive to cut emissions.

Anyway, the EU have decided to remove, or 'set-aside' more than a billion of these credits, so forcing the price back up. Guess what? The big emitters, like the steel industry don't like this. Well tough. Start cleaning up your industry. More here.

Of course, not all environmentalists agree that carbon taxes, or cap-and-trade as the americans call them, are a good thing. Here's a very interesting animation about the downside of these schemes from those clever Story of Stuff people.