Blog
20.February 2006 - 05:20
Auctioning does not solve the problems
Osmo Soininvaara defends (Helsingin Sanomat Jälkipeli 19.02.06) the EU Emissions Trading Scheme and demands a version in which the emission allowances are auctioned. Auctioning would remove many of the current problems in emissions trading, but would bring many new ones. It would bring with it the same effect as a CO2 tax: a tax-type fee would be paid on every tonne of emissions generated – and the aim of the Emissions Trading Scheme was to serve as an alternative to taxes. Covering the whole EU, it would considerably tax companies in international competition.
It would not solve the windfall profit problem, either. Furthermore, the selling price of emission-free forms of electricity generation would unnecessarily be increased.
Soininvaara claims that I recommend the model marketed by heavy industry instead of emissions trading. The reason for that can be that I myself have presented the model in question to heavy industry.
The steel industry’s problem is its abundant CO2 emissions: steel cannot be manufactured without burning coal in the blast furnace process. If we think that steel is nevertheless needed and cannot always be replaced by something else, we must accept the share of the process emissions.
There are huge differences in the emissions of the steel factories in the world. In early 2002, employees’ representatives from the factories of Rautaruukki and Aesta Polarit came to Brussels to describe their own situation and showed statistics comparing the emissions of the steel industries in various countries. The emissions of the Finnish steel industry were the lowest in the world, close to the theoretical minimum. The employees’ representatives were worried that if emissions trading increases costs and, as a result, their jobs will be removed and the production transferred elsewhere, the polluters will reap the benefits.
The steel industry wanted to be excluded from emissions trading exactly because of the process emissions in question. I considered the matter at length and a little later I suggested my idea, which I then called the theoretical minimum: the directive should include the idea that in certain sectors involving process emissions, only the portion exceeding the theoretically smallest possible process emissions should be calculated as part of emissions trading. Thus, instead of punishing the industry in question unreasonably, the system would reward the cleanest operators and motivate the polluters to reduce emissions. This developed in my mind later into an idea of sector-specific theoretical minimums, and I was just happily surprised to hear that also others in this world ponder the same thing.
I agree with Soininvaara that there must be mechanisms, which direct towards low-emission production: if steel and cement can be replaced by wood, the system must encourage doing sp. However, this must be done using other means of guidance than emissions trading – it is too crude a mechanism for that.
When speaking about what does not function and what is unrealistic, it is exactly what we have now in ETS. It does not reduce emissions, it involves carbon leakage, it does not attract others to join the front. The entire Kyoto Protocol is now actually dead, and it is necessary to get new models to replace it.
The model based on sectors of industry is founded on the realism that the world needs and consumes certain products, such as paper, steel and cement. It would be good to create a mechanism, which motivates producers to improve their own manufacturing processes. Even if the production of steel stopped in almost all developed and the so-called transition-economy countries because it is “non-ecological”, there will always be some corner of the world, which will meet the demand for steel. It is difficult to imagine that humankind would succeed in rapidly terminating the demand for steel and replacing it with some other material.
Of course it is possible not to care about industrial enterprises, people’s employment and the needs of the real world. My starting point is more pragmatic: if and when humanity has certain needs, which are met with certain products, the production processes must be as clean as possible.
Published: February 20, 2006
http://www.korhola.com/2006/02/huutokauppa-ei-ratkaise-paastokaupan-ongelmiavastine-osmo-soininvaaran-mielipidetekstiin/
Osmo Soininvaara defends (Helsingin Sanomat Jälkipeli 19.02.06) the EU Emissions Trading Scheme and demands a version in which the emission allowances are auctioned. Auctioning would remove many of the current problems in emissions trading, but would bring many new ones. It would bring with it the same effect as a CO2 tax: a tax-type fee would be paid on every tonne of emissions generated – and the aim of the Emissions Trading Scheme was to serve as an alternative to taxes. Covering the whole EU, it would considerably tax companies in international competition.
It would not solve the windfall profit problem, either. Furthermore, the selling price of emission-free forms of electricity generation would unnecessarily be increased.
Soininvaara claims that I recommend the model marketed by heavy industry instead of emissions trading. The reason for that can be that I myself have presented the model in question to heavy industry.
The steel industry’s problem is its abundant CO2 emissions: steel cannot be manufactured without burning coal in the blast furnace process. If we think that steel is nevertheless needed and cannot always be replaced by something else, we must accept the share of the process emissions.
There are huge differences in the emissions of the steel factories in the world. In early 2002, employees’ representatives from the factories of Rautaruukki and Aesta Polarit came to Brussels to describe their own situation and showed statistics comparing the emissions of the steel industries in various countries. The emissions of the Finnish steel industry were the lowest in the world, close to the theoretical minimum. The employees’ representatives were worried that if emissions trading increases costs and, as a result, their jobs will be removed and the production transferred elsewhere, the polluters will reap the benefits.
The steel industry wanted to be excluded from emissions trading exactly because of the process emissions in question. I considered the matter at length and a little later I suggested my idea, which I then called the theoretical minimum: the directive should include the idea that in certain sectors involving process emissions, only the portion exceeding the theoretically smallest possible process emissions should be calculated as part of emissions trading. Thus, instead of punishing the industry in question unreasonably, the system would reward the cleanest operators and motivate the polluters to reduce emissions. This developed in my mind later into an idea of sector-specific theoretical minimums, and I was just happily surprised to hear that also others in this world ponder the same thing.
I agree with Soininvaara that there must be mechanisms, which direct towards low-emission production: if steel and cement can be replaced by wood, the system must encourage doing sp. However, this must be done using other means of guidance than emissions trading – it is too crude a mechanism for that.
When speaking about what does not function and what is unrealistic, it is exactly what we have now in ETS. It does not reduce emissions, it involves carbon leakage, it does not attract others to join the front. The entire Kyoto Protocol is now actually dead, and it is necessary to get new models to replace it.
The model based on sectors of industry is founded on the realism that the world needs and consumes certain products, such as paper, steel and cement. It would be good to create a mechanism, which motivates producers to improve their own manufacturing processes. Even if the production of steel stopped in almost all developed and the so-called transition-economy countries because it is “non-ecological”, there will always be some corner of the world, which will meet the demand for steel. It is difficult to imagine that humankind would succeed in rapidly terminating the demand for steel and replacing it with some other material.
Of course it is possible not to care about industrial enterprises, people’s employment and the needs of the real world. My starting point is more pragmatic: if and when humanity has certain needs, which are met with certain products, the production processes must be as clean as possible.
Published: February 20, 2006
http://www.korhola.com/2006/02/huutokauppa-ei-ratkaise-paastokaupan-ongelmiavastine-osmo-soininvaaran-mielipidetekstiin/