Magazine of Socialist Action in Australia

Market solutions won’t stop climate change

Reading Time: 3 minutes

Recent opinion polls have shown that support for an Emissions Trading Scheme (ETS) remains at just over 70%, despite 70% of respondents admitting they “don’t know enough” about Rudd’s Carbon Pollution Reduction Scheme (CPRS).

This coincides with 76% of Australians being ‘concerned’ about climate change, with over half the population seeing it as a ‘critical threat’.

What these figures illustrate is the confusion between taking action on climate change and supporting an ETS.

What is an ETS?

Most ETS’s operate under a system called ‘cap and trade’: a carbon cap is set and ‘carbon permits’ (licences to pollute) are distributed and traded amongst the big industrial polluters.

The concept is that over time the cap will be reduced, hiking up the price of carbon permits and, therefore, creating an economic incentive for big business to reduce emissions.

The market component of an ETS actually does nothing to reduce emissions. It simply allows the profitable polluters to purchase their right to continue polluting.

It is only when the cap is reduced (by governments or regulatory bodies) and the amount of carbon permits is lessened that an actual reduction in emissions is encouraged. At least this is the theory.

Business as usual

The European Union’s Emissions Trading Scheme (EU ETS) has become the world’s largest carbon market, worth US$63 billion in 2008. But has it reduced carbon emissions? The unfortunate answer is: no.

Firstly, EU governments succumbed to industry pressure and handed out an over-supply of polluting permits for free! This has also happened with practically every ETS so far. It means that even the most polluting companies make profits off the scheme without even reducing emissions!

Secondly, many companies have actually increased their pollution through “offsetting”. Instead of cutting emissions, companies finance ‘emissions-saving projects’ outside the capped area. The UN Clean Development Mechanism (CDM) is the largest scheme of this nature.

Aside form the obvious problem of shifting the problem to ‘cheaper’ developing nations, with an ETS there is no incentive for big polluters to switch to lower-emitting technology. Pollution continues unabated in one area, assuming that emissions savings will happen elsewhere. This is highly speculative and many of these projects have failed to reduce carbon emissions, with some even increasing emissions!

What has been successful about the ETS’s worldwide is the ability to provide massive profits for big polluters. Citigroup financial analyst Peter Atherton concluded that the European Union ETS had “done nothing to curb emissions” but had helped put “prices up, emissions up, [and] profits up”.

Rudd’s Carbon Pollution Reduction Scheme (CPRS)

The ETS the Rudd Government is proposing is no better that those already failing to reduce emissions around the world.

In many ways the CPRS is worse! Under the scheme, pollution permits, of which 95% will be handed out free, are defined as property rights. This means that if the reduction target is increased, polluters will have to be compensated by taxpayers!

The exclusion of agriculture, the second highest carbon emitting industry in Australia, and the dismal target of a 5%-15% reduction on 2000 levels, shows the CPRS is not capable of impacting on climate change.

The scheme grants over $16 billion dollars in compensation to polluting industries, while they jack up the price of their goods and rake in massive profits.

The Rudd Government’s plan, while lining the pockets of the biggest polluters, ensures that ordinary people get stuck with a bill estimated at $120 billion with no guarantee of carbon reductions!

People and the environment before profit

It’s clear we need a solution that seriously reduces emissions, not one that simply creates new, profitable markets.

Instead of propping up big-business polluters, we need investment into renewable energy technology and public transport. Not only will this facilitate a move away from fossil-dependency, but will also provide thousands of sustainable jobs.

This should go hand in hand with the rapid phasing out heavy polluting industries, like coal-fired power stations, while retraining those workers for jobs in the renewable sector.

But none of this is possible on the basis of a market system that puts profits before all else. Only planned production in the interest of human need, not profit, can tackle the vast and deepening issue of climate change. This is why socialists stand for public ownership and democratic control of production to ensure a sustainable future.

By SP reporters


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