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The Great Climate Giveaway

by nanne Tue Jan 27th, 2009 at 02:32:10 AM EST

In the middle of December, the European Union passed a legislative package on climate change policy that should be understood in the context of this year's global negotiations on the topic. Because the package represents a minor step back from what the EU had promised to do unilaterally, it was lambasted by environmental groups. More surprisingly, some media organisations jumped in on the action.

Many of the objections of environmentalists to European climate change policy can be understood in the context of the 'Overton window'. Their criticism is harsher than would seem reasonable, but this is a design to shift the political centre towards their position.  The centre, in that context, is a social construction mainly formulated through the mainstream media. For more, read this post by Jamais Cascio.

As a perpetual concern troll, I worry whether this approach is overrated. The least that needs to be digested is that the original formulation of the Overton window is about advocating more extreme policies than you wish to see implemented in order to widen the spectrum of imagined solutions. Not just about kicking up noise.

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The background to this climate package is that the European Union has previously declared that it will cut its emissions by 20% by the year 2020, and offered to increase that to 30% if other countries also offer a serious commitment in global climate change negotiations. These numbers take the year 1990 as a baseline,  as it is used in the Kyoto protocol; the EU as a whole is now around 8% below that baseline.

The EU's target to achieve a 20% reduction is complemented by a 20% target for renewable energy, and a 20% energy efficiency improvement. The legislative package that was adopted by the European Parliament contained a set of laws that arranged the emission reductions and renewables. The energy efficiency target is to be achieved through a broader set of measures, only one of which was part of this package.

These targets have all been upheld. However, there are a few elements to the package that have weakened the European commitment:

  • Car makers are now obliged to meet the carbon dioxide emissions standards in 2015, instead of 2012
  • The package includes a giveaway to the coal industry in the form of support for 'Carbon Capture and Storage'
  • The third phase of European Emissions Trading Scheme will still mainly be based upon handing out emission rights for free rather than auctioning them
  • EU Countries have the option to meet up to three quarters of their national targets by investing in third countries

The last point is especially worrying, for political reasons. Many European countries used to be opposed to the Clean Development Mechanism, and the EU had strongly restricted the use of credits gotten through that tool for achieving national targets under the Kyoto protocol, and had similarly restricted their use in the Emissions Trading Scheme. Backtracking by Europe means that there is now no more real opposition to expanding the tool. Promising this kind of boon could also prejudice developing countries in ongoing climate change negotiations against taking on real commitments.

In reaction to the compromise, the WWF has written that the EU has adopted a 'poisoned' climate package, because of the extent to which the targets can be met by importing credits. Greenpeace, meanwhile, doubts whether the 20% target will even be met.

There is a bit of truth and a bit of BS in both of these statements. The truth can be read between the lines in the WWF statement. Under the more plausible expectations of economic growth, resource prices and demographic patterns, the EU should easily meet the 20% greenhouse gas reduction target domestically merely by meeting its renewable energy and energy efficiency targets. The question is rather: who pays?

Under this package, that would be the consumer and the taxpayer. This represents a shift from an implicit corporatist understanding within EU climate policy - that each sector has to pay for a proportional share of emission reductions. Greenpeace frames this in environmentalist terms by saying that polluters now don't have to pay. I'd rather say it's a huge giveaway to companies in those industries that don't face heavy global competition and especially to those in the energy sector. These companies will be able to continue reaping windfall profits by pricing in the cost of emission rights in their products, even though they themselves did not have to pay for the emission rights.

We will all still pay the higher electricity prices. Now, there is a simple way we could deal with this nationally, that doesn't distort the emissions trading market: tax the windfall.

Interestingly, the climate package was also criticised in the pages of the IHT, which had a good article on the EU's 'dramatically scaled back ambitions', and another good article on the Emissions Trading Scheme.

As the package signified a significant retreat on some elements of the EU's climate policy, further retreat can not be ruled out. These policies are now law, and that makes them more secure. But a lot of elements of the energy efficiency action plan still need to be implemented.

Still, the EU is not in peril of giving up its 'climate leadership' - at least not to anyone else. Last time I heard Obama talking about the United States, he was saying he wanted to go back to 1990 emissions by 2020, meaning a 0% decrease. Australia's Kevin Rudd is offering 15% if other countries also commit. Canada is planning a reduction of 2.7%, while Japan has yet to announce an offer for 2020. No developing country has been willing to even talk about setting an absolute cap.

The promise of the EU to increase its reduction to 30% still stands. Considering the offers from other developed countries, the EU probably won't go that far. Regardless, we can now see that two problematic elements will probably remain:

1: Expansion of the Clean Development Mechanism in the next global agreement.
2: Free allocation of most emission rights over the 2012-2020 period of emissions trading.

The first needs to be counteracted globally, in a campaign leading up to Copenhagen, and probably the climate change conference after that. The second can be counteracted domestically, by pushing for windfall taxes.

Display:
The draft is here.

On the upside, I think the biofuels target has now finally been abandoned.

by nanne (zwaerdenmaecker@gmail.com) on Sat Jan 24th, 2009 at 06:07:50 AM EST
An interesting point in there about environmental campaigners also using the overton window concept to shift views in their favour.
Informative diary, thanks.
by In Wales (inwales aaat eurotrib.com) on Sat Jan 24th, 2009 at 03:47:31 PM EST
[ Parent ]
It's all about momentum and sustaining a right left drift as opposed to the left right drift of the last 40 years.  However it's important also not to over-reach, as that could stall the whole process.  I think that's why Obama is trying to maintain a bipartisan consensus even though he doesn't have to on most issues, and even though he knows it will break down sooner or later.  The important thing is that he is seen not to have been the one to have reverted to the "business as usual" adversarial politics so hated by the "non-political centre"...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jan 25th, 2009 at 06:56:41 AM EST
[ Parent ]
... share of any European CO2 emission reduction through promotion of rain forest clearing for tropical biodiesel feedstock plantations, that is a quite substantial upside.

And given current global financial conditions, if it was possible to lower the hard currency required to drive a permanent loss of the long term ecological and economic wealth of a low-income country, its been lowered over the past four months.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jan 26th, 2009 at 10:24:24 AM EST
[ Parent ]
Thanks nanne for this diary and the informative links.

This one has also been useful in the budget area.


You can't be me, I'm taken

by Sven Triloqvist on Sat Jan 24th, 2009 at 07:43:54 AM EST
Informative diary, thanks.
by Metatone (metatone [a|t] gmail (dot) com) on Sat Jan 24th, 2009 at 09:44:35 AM EST
if electricity has to be more expensive to meet the targets, then it's illusory to expect the companies to pay for that themselves. It's always going to be consumers that pay for that, ultimately (just like windfall taxes on oil companies will always end up as higher consumer prices, given the prevailing requirement for returns on equity). The good news about wind is that it actually lowers electricity prices.

The second point is that I'm not too worried about delays of one or two years on measures that go in the right direction. Once we're on that path, there is no ging back.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jan 25th, 2009 at 01:37:55 PM EST
The consumer does pay in the end, but emissions trading works in a way that when you grandfather rights and a company does not face competitive pressure from abroad, it will factor in the opportunity cost of not selling the rights into its product. This then causes the windfall profit, as further explained in the IHT article.
by nanne (zwaerdenmaecker@gmail.com) on Mon Jan 26th, 2009 at 03:38:54 AM EST
[ Parent ]
OK, I should explain this further:

The question is not whether the consumer pays in the end. The question is who the consumer pays. If rights are auctioned, the companies will pass on the costs, of course. But the government receives the revenue. The government can use that money to invest, or to reduce taxes or social security contributions, or whatever.

If rights are not auctioned but grandfathered, the companies still pass along the 'costs' (which are factored in as opportunity costs of not selling the certificates - the price of emission rights determines the costs passed along in both instances), but the revenue goes to their shareholders and executives. So, this is then another transfer of wealth upwards.

by nanne (zwaerdenmaecker@gmail.com) on Mon Jan 26th, 2009 at 08:38:06 AM EST
[ Parent ]
... in fact be handed back as a social dividend, so the higher than average consumer, on balance, pays the lower than average consumer.

And don't get confused by the fact that energy costs tend to be regressive ... that is measured as a percentage of the consumer's income. That is, consumption rises on average with income, just not as fast as income rises. So a social dividend of auction proceeds is a net progressive policy.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jan 26th, 2009 at 10:27:15 AM EST
[ Parent ]
Jerome a Paris:
Once we're on that path, there is no going back.

aah, a cool breeze of reasonable optimism just turned my turbine...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Feb 4th, 2009 at 09:22:51 AM EST
[ Parent ]
What bugs me is this haggling over -0-20% while -50% is more like what is needed.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Jan 26th, 2009 at 04:45:07 AM EST
amen, dodo!

50% would begin to acknowledge the seriousness of the problem, anything less is either paralysis or denial, or both...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Jan 26th, 2009 at 05:21:00 AM EST
[ Parent ]
... not doing enough is of course denial of the severity of the challenge on the part of those who oppose doing that much.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Jan 26th, 2009 at 10:29:16 AM EST
[ Parent ]
BruceMcF:
Not doing anything is paralysis ... (none / 1) ... not doing enough is of course denial of the severity of the challenge on the part of those who oppose doing that much.

that statement has all the lucid limpidity, the satisfyingly intellectual chewiness, and the surgical concision of an epochal aphorism.

keep spitting them out bruce!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Feb 4th, 2009 at 09:26:12 AM EST
[ Parent ]
The EU has the idea that developed countries should take an on average 30% reduction in order to remain below 550 ppm of carbon dioxide equivalents, which again is needed to remain below 2 degrees of warming.

Now, some researchers today say that we rather need to stabilise at around 450 ppm (see also 350.org which is only about carbon dioxide itself). That is not the IPCC consensus, but a lot of scientists are convinced of it.

If we talk about that, then 50% by 2020 would be more in order.

I have mixed feelings about these targets. On the one hand you see that it's not optimal to set them because they induce some kind of inertia. On the other hand, you might want inertia because a more flexible, step-based system could easily be exploited.

by nanne (zwaerdenmaecker@gmail.com) on Mon Jan 26th, 2009 at 07:44:24 AM EST
[ Parent ]
... then get on track for that target, that is not inertia.

Moving the Overton Window requires two groups ... those standing outside the window pulling it in that direction, and those standing inside the wind pushing it in that direction.

And a crucial element is, of course, Shock Doctrine. If there is a shock that opens the possibility for a substantial institutional reform, it will tend to come from those options that are already seen as being on the table - so given that we know that the current level of targets under "serious" consideration guarantees a sequence of very hard shocks, getting an option as being seen as on the table even if an option is not seen as being a "serious possibility" is well worth doing.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jan 26th, 2009 at 10:34:20 AM EST
[ Parent ]
BruceMcF:
And a crucial element is, of course, Shock Doctrine.

supplied, as instrument of last resort, by Mother Nature...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Feb 4th, 2009 at 09:21:48 AM EST
[ Parent ]
"Because of the way carbon dioxide persists in the atmosphere and in the oceans, and the way the atmosphere and the oceans interact, patterns that are established at peak levels will produce problems like "inexorable sea level rise" and Dust-Bowl-like droughts for at least a thousand years, the researchers are reporting in the Proceedings of the National Academy of Sciences."
http://www.nytimes.com/2009/01/27/science/earth/27carbon.html?ref=us
by asdf on Tue Jan 27th, 2009 at 08:41:39 AM EST
[ Parent ]
"People have imagined that if we stopped emitting carbon dioxide the climate would go back to normal in 100 years, 200 years; that's not true," climate researcher Susan Solomon said in a teleconference.

Solomon's report "is quite important, not alarmist, and very important for the current debates on climate policy," added Jonathan Overpeck, a climate researcher at the University of Arizona.

"This aspect is one that is poorly appreciated by policymakers and the general public and it is real," said Trenberth, who was not part of the research group.

"The temperature changes and the sea level changes are, if anything underestimated and quite conservative, especially for sea level," he said.

http://www.google.com/hostednews/ap/article/ALeqM5hMRqVHPx5vcRCKXVKbFlnKZrVJOQD95V4HBG0

by asdf on Tue Jan 27th, 2009 at 09:16:54 AM EST
[ Parent ]
Yes. We'll need a programme to get the carbon dioxide out of the atmosphere again, eventually.
by nanne (zwaerdenmaecker@gmail.com) on Tue Jan 27th, 2009 at 05:02:24 PM EST
[ Parent ]
Hopefully before the oceans do.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Jan 28th, 2009 at 06:24:51 AM EST
[ Parent ]
Why not set a 1% per year reduction target? 20% by 2020 or 50% by 2050 are just catchphrases.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Wed Feb 4th, 2009 at 09:40:38 AM EST
[ Parent ]
You'd want an average of 1% reduction over a multi-year timeframe, due to fluctuations (say, cold winters). I don't know if these targets are just catchprhases, they have been turned into laws, in the EU at least, and Kyoto also worked with these targets.
by nanne (zwaerdenmaecker@gmail.com) on Thu Feb 5th, 2009 at 07:35:37 AM EST
[ Parent ]
They're just catchphrases in that they don't preclude doing essentially nothing for years and then rushing at the end.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Feb 5th, 2009 at 06:05:58 PM EST
[ Parent ]
That's not how it works in emissions trading, though. The national allocation plans will need to be set in advance and will have a yearly decline in the cap. With regard to other targets, fair enough. Depends upon Commission oversight, and so on. My main issue is that it does not allow us to play into new developments.

It may be that we have a set of technological and macroeconomic conditions that naturally lead to a much greater reduction, and the bottom will fall out of the ETS market, again. Then the ETS will just have been a very expensive kind of insurance policy.

by nanne (zwaerdenmaecker@gmail.com) on Fri Feb 6th, 2009 at 04:48:50 AM EST
[ Parent ]


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