Neoliberalism\’s impracticable attempt at climate change mitigation: the effectiveness of carbon trading in the EU

Neoliberalism\’s impracticable attempt at climate change mitigation: the effectiveness of
carbon trading in the EU

Hypothesis: The commodification of the carbon reflects the neo-liberalist approach of the market and thus mirrors and further advances the interest of the agents (corporations, states and individuals) already experiencing significant level of influence on the EU agenda.

Aims:
1) To critically discuss the concept of carbon trading by examining existing debate and its relation to climate change mitigation
2) To provide a historical overview of the development of carbon trading scheme
3) To critically examine the implementation of such mechanism in the EU and its consequences.

Climate change has been considered as the most pressing environmental problem humanity is facing today due to its cross-boundary impact and its interconnectedness to other global issues such as poverty and development. The development of science has allowed to identify the causes of this phenomenon and it is now increasingly recognised that human activities, mainly the use of fossil fuels, are the primary source inducing climactic disturbances (IPCC, 2007, p.36-37). Given the current capitalist system, carbon trading has emerged as the most favoured policy instrument for regulatory measures as the involved economic incentives are concomitant with the market\’s functioning. This paper, therefore, addresses the policy area of carbon trade schemes, its performance and application to the European Union (EU) by briefing to Greenpeace. Greenpeace has been chosen as it is one of the most actively campaigning NGOs and its engagement in environmental issues has proved to be effective in raising awareness and influencing in general policy response. EU, on the other hand, has been successful in introducing a carbon trade scheme which up to date seems to be the largest and most stable, but not necessarily effective, attempt at emissions reduction and as such its performance unambiguously reflects the approach towards which global response to climate change is directed at.

As capitalism has been the dominant market-based approach for the last several decades, the market around which carbon trading is performed is also executed in capitalist terms. From an economic perspective, the introduction of such market is perceived as an opportunity for economic profit through business investment (Stem et al., 2006), transforming environmental degradation practices into capital accumulating sources (Bakker, 2005, p.543) and it is seen as a cost-effective way of reducing greenhouse gasses (GHG) (Bumpus & Liverman, 2008, p.131 ). These claims, according to the market structure, seem to be the most appropriate and thus it should be assumed that the adoption of carbon trade schemes is the plausible global scenario to occur but in fact many emerging countries such as China, Brazil and India, although contemplating, have not yet implemented them as national regulatory measures (Sterk & Mersmann, 2011). One way to account for this non-conformity is that climate change is a multi-field study incorporating not only economic aspects but also scientific, social and political dimensions. Here issues of climate change uncertainty (Mathys & Melo, 2011, p. 10), speculation with carbon as a commodity (Lohmann, 2005), failure to produce structural changes (Bohm & Dabhi, 2009, p.15) and lack of legitimacy, accountability and ethical problems of the governing process of carbon trading (Stephan & Paterson, 2012; Caney & Hepburn, 2011; Page, 2012) are discussed to indicate the complexity of the market and the need for subsequent alterations. The combination of all these fields of study does not reject the idea of carbon trading market but instead emphasises on advancing the performance\’s politics – the flow of capital should stimulate competitiveness and innovation practices through which industrialised countries should encourage the replacement of fossil fuels with renewable energy, the main stance Greenpeace takes in combating climate change.

Historically, the emissions markets have their roots in 1970s and 1980s, mainly in the US. Concerns about the environment and human health in relation to the sulphur-dioxide emissions were raised in the US Congress which later contributed to a legislation that created demand for such market (MacKenzie, 2007, p.4-5; Lane, 2012). Since then the first international legal binding attempt at GHG reductions that promoted carbon trading was the 1997 Kyoto Protocol. The general idea is that all GHG were converted to one tonne of carbon dioxide equivalent and thus each country is given a certain amount of credits depending on
their current GHG emissions in order to meet its reduction obligations in terms of percentage of their 1990 levels (UN, 1998). Despite that the Kyoto Protocol was met with controversies (excluded emerging economies like China and US unwillingness to participate) it went into operation in 2005 legitimising the establishment of 3 market mechanisms: Emissions Trading (ET), Joint Implementation (JI) and Clean Development Mechanism (CDM) (UNFCCC, 2007). A brief explanation of these markets is further presented to identify their performance and key issues surrounding them.

EU trading scheme was implemented by the European Commission and represents a combination of two of Kyoto Protocol\’s market mechanism – ET and CDM. The implementation of these systems are inter-related as signatories under the ET, not able to meet their reduction targets, are given the chance to invest in reduction programmes (an amount equal to the one that has not been met) in developing countries under the CDM. The scheme consists of three phases but only the first two are being discussed as the last one has not begun yet. During the first one: issues favouring the influential agents such as grandfathering (House of Commons, 2010, p.18), over-allocation (Ellerman & Buchner, 2007) and lack of transparency in CDM projects (Bohm & Dabhi, 2009, p.17) are presented and examined. Although there is a general tendency that the first phase was more experimental rather than an actual tool for GHG abatement (in terms of reduction levels and efficiency), it has helped outline the shortcomings and thus strengthened the policy process. This is indicated in phase 2 where auctioning is taking a greater place and a fixed amount of overall credits is proposed for its period aiming for a decrease of 2005 levels by 5%. Nevertheless, this phase also suffered from various difficulties: allocation between difference sectors; discrepancies and incentives in the governing process of distributing allocations; and rules concerning new entrants in the system (Carbon Trust, 2007, p.12).

The project aims to conclude by suggesting that although the carbon market has grown dramatically and thus has opened new room for economic growth its implementation has achieved minimum, if not obscure, abatement progress so far and it has served as an additional manoeuvring tool for industrialised North in the debate over climate change responsibility. A strong political willingness for participation and strengthening of the governance regime is needed which the engagement of environmental NGOs such as Greenpeace could contribute for.

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other resorses to use
Development, neo-liberalism, globalization
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