ETS Lost at Sea

A British NGO called Sandbag has released a quantitative analysis of the effects of the current recession on the ETS -- Europe's version of cap-and-trade, and has found the program to be seriously flawed. Sandbag claims that (here in PDF),

Targets for the Emissions Trading Scheme were already weak and have now been further undermined. . . At the moment the ETS embodies a reversal of the polluter pays principle, where instead polluters are being paid to do nothing to reduce their emissions.

Their critique rests on the fact that there are too many permits available in the European system to lead to a meaningful cap. Too many permits results from an overallocation and also surplus permits resulting from the current economic recession. Sandbag recommends that the caps be tightened and made more real. Good luck with that.

Tim Yeo, member of the UK Parliament, comments on the report's significance:

These findings confirm what many have begun to suspect. Although emissions trading remains conceptually valid, in practice the EU ETS has not succeeded in driving investment in low-carbon technology.

If the ETS is not driving investment in low carbon technology, then what is the point?

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