Bad News for Cap and Trade Foes: Europe's Emissions Trading System WORKS
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It's one of the most common lines you hear from cap and trade opponents: "Well, just look at Europe." You see, the European Union Emissions Trading System was long thought to be a spectacular failure. It initially allowed utility companies to reap massive profits, since they were given their permits for free and passed the cost of carbon onto consumers--nearly the opposite of what was supposed to happen. Additionally, for a long time, many thought ETS would be sorely inadequate to get EU nations to meet their Kyoto targets, making the whole process a waste of time. Well, the days of bashing Europe's cap and trade are over--a new report reveals that despite its major stumblings, it's actually been a spectacular success. According to Climate Progress, the report, Climate Policy and Industrial Competitiveness (pdf), completed by the economists, climate scientists, and academics of the German Marshall Fund, reveals that Europe's cap and trade has lead many countries in the EU to meet their carbon targets as agreed to in the Kyoto Protocol.
The trading system has created a healthy carbon market now worth 56 billion US dollars, and has reduced Europe's emissions by 50-100 million metric tons a year since 2005. In other words, the cap and trade has been responsible for Europe reducing its carbon emissions by 2.5-5% annually. Which is indeed a pretty impressive achievement. And the success has been largely due to the fact that the system's design separated its implementation process into 3 phases, so there would be pause for analysis and adjustment. This allowed policymakers to consistently reevaluate the system, and they were able to stop problems, like the aforementioned practice of sticking consumers with the cost of carbon.
So, let's see. Hugely significant amounts of carbon emissions cut, and Kyoto targets within reach? Check. A robust, investment-attracting carbon market? Check. Flexibility and room for further improvement? Check. Sounds like a success to me.
This is all encouraging news, to say the least: with the knowledge that the world's major pioneering cap and trade is working effectively, US policymakers should now be able to take lessons learned from the turbulent inception of the ETS into account as they continue the long slog towards passing a bill that would create such a system stateside.
And next time someone snidely says "Well, just look at Europe" the next time you get into a debate about cap and trade, you can just say, "Okay. I think we should."
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