The European Emission Trading System (ETS) is an utterly ineffective attempt to prompt a “market” response to rising carbon emissions. It is ineffective because it has not prompted the allegedly intended market response, and that is because the market has been deliberately blocked from responding—and by the very country, Germany, that led the way in promoting carbon trading and creating the ETS.
A true market response to expensive carbon would have been overwhelmingly nuclear and would have simply ignored inefficient and expensive non-solutions like wind and solar. The market would have chosen nuclear because nuclear plants create huge amounts of low-cost electricity without any carbon emissions. They are the natural choice in a carbon-constrained market. But because Germany is in thrall to an anti-nuclear lobby, the entire ETS was designed to favour natural gas as a “low carbon” alternative to coal. Coal, after all, still makes most of Germany’s electricity.
All of this should be a cautionary tale, but it is not. The ETS is more public relations than anything else. As I have described in earlier articles, it was expressly designed to allow participating countries to game the system in their home industries’ favour, by allowing politicians to negotiate their national carbon caps. Those caps are based on emission estimates from industries, and it is in those industries’ interest to highball their emission estimates. It is also in politicians’ interest to go along with their home industries, otherwise energy prices in their home countries would skyrocket and the politicians would lose their jobs in the next election. So this built-in collusion keeps the “market” price of carbon low, and essentially keeps things as they are.
But only people like me who follow these things know or care about this. The rest like the PR buzz that comes from schemes like the ETS. It’s symbolic. Nothing more.
Which makes the current development out of China all the more interesting. China has since last year been making noise about introducing carbon trading. That country makes most of its electricity with coal, and is now the world’s biggest emitter. However, it is not its reputation among the jet-setters who fancy themselves the global agenda-setting elite that has China playing the symbolic carbon-trading game. It is internal pressure—from the burgeoning urban constituencies within China. Urban air quality in China is awful. And cities have emerged as huge political power centres.
It is ironic that China, which proclaimed itself communist along Marxist-Leninist lines in the wake of the 1949 civil war, only underwent (or is currently undergoing) a true Marxist revolution after having created, by force, the urban proletariat it lacked in 1949. In classical Marxism, the urban proletariat overthrows its feudal masters. The question in the context of modern China is: has that happened already? Is the current government the result or the object of the proletarian overthrow? The media stories about carbon trading could be evidence either way.