Julian Glover’s piece in the [Guardian](http://www.guardian.co.uk/commentisfree/2009/feb/23/glover-carbon-market-pollution “”) today is a welcome wake up call for decision makers in Brussels. It tells the story behind the current carbon price crash clearly and concisely. It also correctly points out that there is still time to save the situation.
As mentioned previously the Directive has been recently reviewed and will not be finalised until after the next UN meeting in Copenhagen in December of this year. So there is still time to make this thing work.
Here are some of Sandbag’s demands:
Future caps need to be tightened – the scheme hands out absolute numbers of permits – proposed amounts were calculated at a time when Europe was confidently expecting economic growth. The fundamentals have changed (not to mention the science also getting more alarming) so caps must be recalculated and tightened in response.
Banking of spare permits into the next phase of trading, beginning in 2013, must be limited – this is the only way to stop the ‘hot air’ arising from the present recession polluting the next phase too.
Just as a clause has recently been inserted to allow Government’s to intervene to correct price ‘spikes’ a clause also needs to be added that creates the same powers in the event of a price collapse. Creating the ability to reduce the number of permits released by auction would be one way of achieving this.
Incentives should be introduced to encourage companies holding excess permits to cancel them rather than sell them. If correctly allocated this is a truly additional environmental action and one which Governments should reward as it makes the task of meeting our international obligations under Kyoto easier to meet.
It should be possible for civil society to have access to permits in return for demonstrable action to reduce their emissions downstream. For example, a family reducing their consumption of electricity through their own actions and investments, should be able to claim the permits and then cancel them to ensure the emissions they have saved genuinely result in a benefit to the environment and are not just traded away to other would be polluters.
Other sectors should be included in the scheme and capped to create additional demand for permits – transport and heating fuels should be capped at the point at which they leave refineries/enter the market. It is far more sensible to spread the cost of decarbonisation across the whole economy and away from industrial sectors.
There will be those that are calling for a floor price to be introduced to stop prices going below a certain value. We do not support this at an EU level. Individual member states may wish to adopt policies that guarantee certain prices to support new technologies such as CCS but at an EU level the market must remain free otherwise the over allocation of permits can continue unnoticed with the illusion of a functioning carbon price being maintained – far better for the environment to set tighter caps to ensure a positive price.