It is now plain that something has gone badly awry with the European Union’s policies and views on the issue of climate change. Plain to any observer, it seems, other than the EU Commissioner for Climate Action Connie Hedegaard, and her colleagues inside the shiny towers of the Brussels quartier européen. They continue to assert in a triumph of hope over experience that it will all come good with more of the same polices that have just failed.
The EU Emissions Trading Scheme and associated promotion of so-called “cap and trade” carbon trading has crashed and is burning. The carbon price had already crashed twice before the present time. That isn’t to say that nothing is happening: much is. A false market in the non-emission of carbon has been created by fiat and is having a dampening effect on already fragile EU economic recovery. But it is fertilising a luxuriant undergrowth of consultants and ‘carbon traders’, rather in the way that speculators in other classic ‘bubble’ markets have been enriched in the past.
‘Bubble’ markets are quite familiar and the motives driving them never change. In 1841 Charles Mackay observed in one of the first works of modern sociology, entitled Extraordinary Popular Delusions and the Madness of Crowds, that greed, ingenuity, credulity and the capacity for self delusion are pretty constant in human nature. Famous examples of bubble markets were for tulip bulbs in the Netherlands in 1636, or the Mississippi Scheme of John Law in France in 1719-20 or the best known – the South Sea Bubble a couple of years earlier in England. By the way, the promoting motive of the South Sea Company has a cautionary contemporary ring in post-Brownian Britain today as we are told of ever-promised and never materialising ‘green growth’: it was supposed to pay off the government’s debt painlessly, by privatised venture.
The EU ETS therefore has a long pedigree. What has it achieved materially, so far? It has, for example, enriched Chinese manufacturers of the pollutant CFC-23, manufactured to be destroyed in order to sell the certificates for so doing to Japanese and European businesses as ‘carbon off-sets’, thereby enabling them to meet their EU targets without changing their own activities. There is a developing scandal over ‘revolving door’ relationships between the certifiers of off-set schemes in the poor world, and their promoters. The EU ETS has been the medium for the biggest VAT “carousel” scam in modern times. Major European corporations have mainly engaged it in the twin modes of tax avoidance (relocating out of its reach) or exploiting subsidy-funded markets, however silly. So we end up with German solar panels or British wind-mills in inappropriate places and the growing threat of future energy shortages. When the subsidies are withdrawn, as happened recently for the Spanish solar industry, the sector implodes.
Mrs Merkel’s posture on the topic is a useful bell-weather of this. As Chancellor of a European country that still makes and exports things, when the rubber hit the road in December 2008 this former German environment minister demanded – and got – exclusions for German exporting industries. Since then she has distanced herself still further from what looks like a loser’s policy.
So whatever it has done materially – and unintentionally we must assume – the EU Climate Policy has failed to become a world leading model for ‘climate action’. Especially now that ‘cap and trade’ is dead in the USA for the foreseeable future with the failure of Obama’s climate policy to thrive in Congress, whatever is done about anthropogenic carbon world-wide will clearly not be done the EU way.
Not that this is much loss, because the EU policy produced no discernable real world evidence of accelerating the natural rate of decarbonisation in Europe. The European rate is no faster than that of the USA, which has never been party to the broken ‘Kyoto Protocol’ approach of top-down target setting. So the challenge to Ms Hedegaard is the reverse of what she thinks. Can she courageously admit failure and change to proven policies that actually work?
Some of us have argued for over twenty years that it would likely all end like this for the top-down ‘command’ approach. But until 2010, our case (a multi-dimensional analysis that has blossomed over time and that is soon to be published in a collection of essays from the 1980s to the present, entitled The Hartwell Reader) has not been being clearly heard. Now it is beginning to be so, especially in Asia and the Americas.
Our reasons for predicting that the EU ETS/Kyoto Protocol approach had no chance of achieving its stated goal of accelerating decarbonisation were most recently explained in The Hartwell Paper, published in May. This is the fruit of a collaboration of thirteen scholars and practitioners worldwide, which presents the first coherent blueprint of a radically different and radically pragmatic way of accelerating decarbonisation without alienating voters or damaging, depressing and distorting our economies, but instead, doing the opposite.
My self-evident scepticism about the EU method and my hostility to the arrogance with which it is being driven on regardless of the evidence, arise in large part from my eagerness to get on with decarbonisation. So those who do not like what I write here do not have the easy escape of condemning me as a ‘denier’ whose views they can therefore ignore in a fragrant cloud of self-righteousness. This is at root a business case, not a religious debate.