Carbon is dead?

Published:  05 June, 2014

Karen Fletcher.

Measuring carbon is quite complicated, and often very political. Are carbon reduction schemes helping us achieve lower emissions – or confusing the process? Karen Fletcher considers the options.

You can’t control what you can’t measure. It’s an old management truism. Encouraging or forcing businesses to measure their carbon emissions requires developing a  way to make it a measurable commodity. As a result, we have seen the development of emissions trading schemes (ETS) across the world. The EU ETS was launched in 2005 and is now in its third phase running from 2013 to 2020. It includes 11,000 power stations and industrial plants acrossEurope.

It is a cap-and-trade system for large emitters of pollutants, including carbon. The ETS covers ‘large emitters’. For other businesses using a lot of energy, other schemes were introduced at national level. In theUK, this is the Carbon Reduction Commitment (CRC).  In April 2014 the CRC entered a second phase which runs until 2019 (somewhat confusingly, this is officially called the ‘Initial Phase’, even though it’s not).

When initial announcements were made about the CRC it was meant to me scheme that would tax those who emitted too much and reward those that reduced emissions.  At the start of the scheme it  also included a league table of emitters to use PR as a lever on businesses to reduce their emissions.

Unfortunately, the CRC had many of its teeth removed before it even launched. The league table has gone and financial incentives for improvers have been removed.

This is one of the problems with carbon – it can get a bit political. The idea for the initial CRC was changed by a government that did not want to create more red-tape for business. Simplifying the scheme might have reduced the paperwork, but cynics also saw it as an easy way for government to collect extra tax at a time when the Revenue needed to boost income.

Large-scale ETS schemes also face major challenges. In the EU (as with everywhere else) the poor economic climate has resulted in an industrial slow-down that in turn has reduced carbon emissions. Good for the environment, but as a result, the trading price for carbon has hit rock bottom – because no one needs to buy ‘extra’ credits. The scheme has effectively ground to a halt.

And inAustralia, we see that carbon can become a deeply political issue which is not conducive to smooth operation of a trading scheme. The Australian ETS is being  undermined by politicians of different parties either claiming that the scheme has created jobs and boosted business; or that it has been a burden on Australian industry  and its massive coal mining sector in particular. Only this week politicians were threatening to shut down the ETS altogether, creating uncertainty in the national market.

Putting a value on carbon seems like a great idea to encourage industry and business to reduce emissions. But is it just too complicated?  Business in a free market tends to follow a path of least resistance, and with the best will in the world, most business people have more to think about than the price of carbon and costs of allowances.

Even inChina, where an emissions trading scheme has recently been launched, the man in charge admits that the government has had to force organisations to take part. Ge Xing’an, vice president of the China Emissions Exchange, commented:  “ If it is not compulsory, the trading won’t work. It doesn’t work inChinaand it doesn’t work well for the international community either.”

Emissions-based schemes seem to tackle the issue of carbon head on. But they are by their nature complex, difficult to implement because they require legislative enforcement, and therefore liable to the whims of politicians. We have to ask if it might not be easier to concentrate on energy efficiency as a way to reduce emissions. There is already a price for energy, which doesn’t have to be enforced by government. And as those prices are going ever-upward, there is a natural tendency for businesses to pay attention – and to be driven to be more efficient in the course of their everyday business. 

Karen Fletcher is Director of Keystone Communications

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