Taxes on Slaying Carbon Emissions

Carbon Emissions

Right on lead, the initiatives appeared in the same week that crushing high-energy floods caught both Europe and China, reminders of the destruction that the new measures intend to deflect.

In the long term, analysts state that the measures may yet achieve what they promise. Those include building a better set of incentives for energy production and consumption (and widening a tradable asset class that has given handsome returns in the last few years).

But soon, their influence is likely to be minimal. It will be vulnerable – if the past is any example – by lobbying and the subsequent dilution of such regulations. Those wishing to make a fast buck on carbon permit futures will require an exhaustive knowledge of the small print of local law as it develops.

The EU’s ‘Fit for 55’ emissions reduction strategy issued last week is much more wider-reaching. However, China’s is more relevant, given the country’s status as the world’s biggest current polluter.

Without adequate reduction by China, the goal of 1.5 degrees is essentially impossible, U.S. envoy John Kerry stated in a speech on Tuesday, committing to the Paris Climate Accord’s fundamental aim of restricting average temperature growth worldwide.

China promised to decrease its discharges from 2030 onward and be carbon neutral by 2060. However, the country is still building coal-fired power stations – a living, belching representation of the ‘carbon leakage’ phenomenon.

 

Chinese Trading Scheme Starts with Power Sector

 

Polluting industrial activity transits to countries with laxer regulation.

So it’s good to observe the Chinese trading scheme beginning with the power sector. It is across 2,000 power companies that value 14% of energy-related emissions worldwide.

Nevertheless, the prices given for emissions credits on Friday’s debut day in Shanghai is scarcer than $8 a ton. It is nowhere near the $50 level that the International Monetary Fund states would be compatible with Paris.

The truth is that the only long-term beneficial scheme troubles. President Xi Jinping’s record in this context is not promising. Repeatedly, he has soaked down or retreated from ambitious fundamental reforms once their short-term economic cost has become apparent.

Key polluters such as the petrochemicals industry hold three years to lobby the government before spending a penny for their emissions. There is no direct reference in the ETS purposes to an actual decrease in emissions over time. The danger of backsliding is all too obvious.

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