The EU ETS and its lack of political leadership

There is a criminal lack of political leadership in the matter of the EU ETS.  The European Commission’s hapless bureaucrats are trying to fill the gap, but their hands are tied, so the results are feeble.

The Commission has been worried for some time about low carbon prices.  The EUA price is so low that it is not stimulating the desired level of investment in clean technology.  And it is cheaper for power stations to burn coal than gas.  As a result the current EUA price influences neither operating nor investment decisions.

So in order to boost the carbon price, today the Commission published its proposals for structural reform of the EU ETS.  The document is so lightweight that I sighed in exasperation and it shot across my desk and slipped into the bin.  (http://ec.europa.eu/clima/policies/ets/reform/docs/com_2012_652_en.pdf)

The document lists six options for restructuring the scheme: a more ambitious target, cancellation of allowances, a steeper annual reduction factor, expansion of the scope of the scheme, limiting of use of international credits and a discretionary price mechanism.

Nothing is quantified (except for the possible 30% target); the document is so short that it cannot deal with the issues with the thoroughness they merit; there is a glance beyond 2020, but insufficient emphasis is placed on raising the profile of the long-term reduction targets.

This piece of paper is indecisive and it is not surprising that the EUA price fell 60 cents in response.  It is merely the promise of consultation on wide-ranging topics.  It gives no direction, no confidence to the market that something can or will be done.  In short, it shows no leadership.  Without leadership, there is no confidence.

But what could the Commission do?  If it does not show many options to please everyone it will be castigated for being undemocratic.  If it shows too many options (and the wrong ones!) then it will be accused of being wobbly and spineless.

This happens because the European Commission is not a political body and therefore it cannot show leadership.  It is a body of bureaucrats.

The real people to criticise are not the European Commission.  They are “just doing their job”.  The people really at fault, the ones letting us down, are the politicians who abdicate their political responsibility: they are happy to let the Commission muddle on with trying to fix the EU ETS.  Yet, as elected representatives and political leaders, they are the ones who should be up there calling loudly and clearly for reform.  But it’s not a priority.  Such is their cowardly silence that I can hear the cracking of melting ice from thousands of miles away.

Perhaps I am overreacting.  Perhaps this is the reality of politics.  Perhaps Sandy and the PWC report about 11 degrees temperature increase by 2100 and the warnings about the new IPCC report … perhaps they are making me unduly sensitive to the problem of climate change.  Perhaps.  But probably not.

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