Thursday, December 13, 2018

Climate Change: Ignoring the cow in the room

Earlier in the year the government ran a consultation on improvements to the Emissions Trading Scheme, aimed at making it actually work. Yesterday, they announced their decisions. Most importantly, the total number of units available to the ETS will be capped, with future caps announced five years in advance to give the market certainty about how much they can pollute. The implication is that the cap will shrink towards our targets. Secondly, units will be auctioned by the government. Which is broadly what we needed to do in the first place, before the scheme became a polluter support scheme loaded with free allocations and exemptions to subsidise incumbents. Speaking of those free allocations, they will continue for the moment, but there will apparently be a decision on them next year. And for the system to actually function, they need to be eliminated as quickly as possible (a five year transition period seems more than fair IMHO).

The other big change is the price cap. At the moment, polluters can simply bank their units and pay $25 / ton - a strategy which makes sense when carbon prices are higher than that (as they are ATM). The government will replace this with a "cost containment reserve", which will auction a set number of new units into the system if prices rise too high. These units will be backed by an equivalent tonne of removals, so in theory it means no net pollution. But it both undermines the ability of the scheme to actually reduce pollution, and creates a pool of credits future governments will be tempted to sell or give away to their donors. Obviously, price spikes are bad for polluters, but that's the point. If the carbon price is "too high" for a polluter, the market is sending a signal that what they do is no longer viable, and that they should either pollute less or shut down. We accept this logic for every other business input: wood, petrol, electricity, wages. We should treat carbon - which threatens our fucking lives - no differently.

These are useful changes, but still just tinkering around the edges. The core decision - what to do about agriculture - has again been put off, left hanging while the Zero Carbon Act consultation considers whether we even have a target for agricultural emissions, let alone whether we should make farmers pay their way. And until we do the latter, our ETS will ignore our biggest source of pollution, and be fundamentally broken and unfit for purpose.