News reports suggest that Australia could become the first country to shut down its carbon trading scheme, essentially giving polluting industries the green light to continue with business-as-usual. The point of the carbon trading law was to put a minimum price on the emission of carbon dioxide, a kind of subsidy-in-reverse on industries and companies that release a lot of CO2, and an incentive for businesses to reduce their emissions as much as possible – after all, no carbon dioxide means no additional carbon payment, which potentially means more profit than your competitors. All of this has proved too forward thinking for the new right wing prime minister of the country, who seems to deny the fact that climate change even exists.
This will not come as a massive surprise to many of us. Australia has long been known as the villain in international climate negotiations, showing a thick-headed lack of responsibility for their own role in causing the problem (particularly through a very heavy use of coal), and refusing to countenance any possibility that they might have to change their ways to improve life for Australians and for the rest of the planet. Per capita, Australia is now one of the highest polluters in the world.
However, while it may be easy to criticize the Aussies for their decision to turn their backs on carbon pricing, we should also be critically examining similar schemes in the rest of the world and asking ourselves if they are really helping. Only a few countries have large, firmly in-place carbon trading schemes, and much of the evidence suggests that those that do exist have been poorly designed and are plagued with problems – the EU carbon trading platform being the primary example.
The EU platform has had a serious problem with a practice known as ‘grandfathering’. The argument was that existing industries would find it too difficult to cope with carbon trading if they had to start paying for all their emissions at once, so the EU agreed to provide a certain number of free carbon permits, with the idea that the companies would then pay for any pollution greater than the number of permits they were given. Unfortunately, and presumably due to corruption and lobbying, many big companies were given permits greater than the total amount of carbon they already emit – meaning they don’t have to pay anything to the trading scheme, and even have leftover permits to sell to other companies. The oversupply of free carbon permits has essentially collapsed the price of carbon in the European market, rendering the scheme useless.
If we are not going to take carbon pricing seriously – and the EU scheme most definitely does not take it seriously – then perhaps it is better if we all take the Australian route, give up on it, and start again with something better and more robust. One option is to severely limit the amount of carbon permits available, and making the punishment for over-pollution much more severe, rather than allowing the market to decide on how seriously pollution and emissions should be taken. Fines from the government for polluting could be considerably higher than the price for carbon on the open market has proved to be, and non compliance could easily be punished further by shutting companies down. This would be a brave move by any government, but brave moves are what we need right now. The market has clearly failed, and now it is time for governments to step up and show some commitment and strength by putting legal limits on emissions, rather than simply market limits.
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