C
Captain Compassion
Guest
EUROPE'S CO2 EMISSIONS CONTINUE TO RISE
The Wall Street Journal, 3 April 2008
http://online.wsj.com/article/SB120715961005983677.html
Cap and Trade Wins on Market, But Problem Grows
By LEILA ABBOUD April 3, 2008; Page A8
The European Union's greenhouse-gas emissions from key industries rose
1.1% last year, despite its antipollution policies, demonstrating the
difficulty in meeting international commitments to fight climate
change.
Carbon-dioxide emissions reached 1.914 billion metric tons last year
in the sectors covered by Europe's Emission Trading Scheme, according
to an analysis of data by Oslo-based Point Carbon, a carbon
market-research and consulting firm. The data released Wednesday
aren't complete, because some companies' results are still trickling
in, but it represents about 93% of the total, according to the EU Web
site.
For the past three years, Europe has been trying to reduce emissions
by imposing a market-based cap-and-trade system. Industries such as
power generators, steel, cement and aluminum are supposed to cap the
amount of carbon dioxide they spew. If they can't make their targets,
they must buy permits to emit carbon on the open market.
By forcing companies to buy and sell the right to pollute, Europe's
system is supposed to give them a financial incentive to clean up
their acts. It is also supposed to provide European countries with a
way to meet their commitments to the Kyoto Protocol, the United
Nations accord that set emissions-cutting targets for the 175 nations
that ratified it for the period between this year and 2012.
Some 11,500 factories, oil refineries, steel mills and other
installations are covered by the EU scheme, accounting for about half
of Europe's total emissions. There is still no limit on the other
half, produced by everything from cars and planes to buildings and
retail outlets.
But the caps that the EU set for different industries turned out to be
too high. As a result, instead of shrinking, as was originally
envisioned, emissions in these industries have crept up by about 1%
each year since the program began.
Europe's struggle to make its cap-and-trade program work shows just
how hard it will be for the industrialized world to achieve any
meaningful reduction in greenhouse-gas emissions. Japan isn't faring
any better: Its Kyoto targets call for it to reduce emissions by 6%
below 1990 levels, but emissions are actually increasing there as
well.
The issue is taking on greater importance in the U.S., the world's
biggest economy and still the largest emitter of carbon dioxide, the
main global-warming gas. All three leading presidential candidates say
they are in favor of establishing a cap-and-trade system similar to
Europe's, and the Senate is expected to consider cap-and-trade bills
this summer.
Europe's cap-and-trade system has been plagued with design and
implementation problems from the start. Chief among them: National
governments issued too many carbon permits -- essentially a license to
pollute -- to regulated industries. As a result, companies had no real
incentive to revamp their factories. Regulators in Europe have tried
to get the scheme back on track by forcing governments to ratchet down
the number of permits they issue during the program's second phase,
from 2008 to 2012.
Although the scheme has so far failed to reduce emissions, it has
spawned a fast-growing market for trading carbon permits. Last year,
the value of all the carbon credits traded in Europe topped $40
billion, up 55% from the previous year. Hedge funds, investment banks
and brokers trade carbon permits as they would any other commodity,
like gold or oil. And while the data released Wednesday might fuel
pessimistic predictions about the effectiveness of the scheme in
holding back emissions, financial players were bullish about what it
meant for the carbon market.
Patrick Weber, a carbon trader for Allianz AG's investment-banking
unit Dresdner Kleinwort in London, spent the day fielding phone calls
from German utilities and industrial companies regulated by Kyoto. "We
still think there will be a net shortage in carbon credits through
2012, so prices should go up from here," he said.
The price for a carbon permit for delivery in December 2008 increased
4% to
The Wall Street Journal, 3 April 2008
http://online.wsj.com/article/SB120715961005983677.html
Cap and Trade Wins on Market, But Problem Grows
By LEILA ABBOUD April 3, 2008; Page A8
The European Union's greenhouse-gas emissions from key industries rose
1.1% last year, despite its antipollution policies, demonstrating the
difficulty in meeting international commitments to fight climate
change.
Carbon-dioxide emissions reached 1.914 billion metric tons last year
in the sectors covered by Europe's Emission Trading Scheme, according
to an analysis of data by Oslo-based Point Carbon, a carbon
market-research and consulting firm. The data released Wednesday
aren't complete, because some companies' results are still trickling
in, but it represents about 93% of the total, according to the EU Web
site.
For the past three years, Europe has been trying to reduce emissions
by imposing a market-based cap-and-trade system. Industries such as
power generators, steel, cement and aluminum are supposed to cap the
amount of carbon dioxide they spew. If they can't make their targets,
they must buy permits to emit carbon on the open market.
By forcing companies to buy and sell the right to pollute, Europe's
system is supposed to give them a financial incentive to clean up
their acts. It is also supposed to provide European countries with a
way to meet their commitments to the Kyoto Protocol, the United
Nations accord that set emissions-cutting targets for the 175 nations
that ratified it for the period between this year and 2012.
Some 11,500 factories, oil refineries, steel mills and other
installations are covered by the EU scheme, accounting for about half
of Europe's total emissions. There is still no limit on the other
half, produced by everything from cars and planes to buildings and
retail outlets.
But the caps that the EU set for different industries turned out to be
too high. As a result, instead of shrinking, as was originally
envisioned, emissions in these industries have crept up by about 1%
each year since the program began.
Europe's struggle to make its cap-and-trade program work shows just
how hard it will be for the industrialized world to achieve any
meaningful reduction in greenhouse-gas emissions. Japan isn't faring
any better: Its Kyoto targets call for it to reduce emissions by 6%
below 1990 levels, but emissions are actually increasing there as
well.
The issue is taking on greater importance in the U.S., the world's
biggest economy and still the largest emitter of carbon dioxide, the
main global-warming gas. All three leading presidential candidates say
they are in favor of establishing a cap-and-trade system similar to
Europe's, and the Senate is expected to consider cap-and-trade bills
this summer.
Europe's cap-and-trade system has been plagued with design and
implementation problems from the start. Chief among them: National
governments issued too many carbon permits -- essentially a license to
pollute -- to regulated industries. As a result, companies had no real
incentive to revamp their factories. Regulators in Europe have tried
to get the scheme back on track by forcing governments to ratchet down
the number of permits they issue during the program's second phase,
from 2008 to 2012.
Although the scheme has so far failed to reduce emissions, it has
spawned a fast-growing market for trading carbon permits. Last year,
the value of all the carbon credits traded in Europe topped $40
billion, up 55% from the previous year. Hedge funds, investment banks
and brokers trade carbon permits as they would any other commodity,
like gold or oil. And while the data released Wednesday might fuel
pessimistic predictions about the effectiveness of the scheme in
holding back emissions, financial players were bullish about what it
meant for the carbon market.
Patrick Weber, a carbon trader for Allianz AG's investment-banking
unit Dresdner Kleinwort in London, spent the day fielding phone calls
from German utilities and industrial companies regulated by Kyoto. "We
still think there will be a net shortage in carbon credits through
2012, so prices should go up from here," he said.
The price for a carbon permit for delivery in December 2008 increased
4% to
