Hill Heat

A report from the Government Accountability Office finds that Europe’s initial cap-and-trade system for limiting greenhouse gases set overly high limits and gave redistributed significant wealth to covered entities. The report (GAO-09-151), requested by Republican members of the House Energy & Commerce Committee, was completed November 18 but publicly released today.

The summary notes that the cap was set too high:

By limiting the total number of emission allowances provided to covered entities under the program and enabling these entities to sell or buy allowances, the ETS set a price on carbon emissions. However, in 2006, a release of emissions data revealed that the supply of allowances-the cap-exceeded the demand, and the allowance price collapsed. Overall, the cumulative effect of phase I on emissions is uncertain because of a lack of baseline emissions data.

The report also notes that polluting entities passed on the price of emissions permits to consumers, despite receiving them for free, resulting in windfall profits:

Studies have found that in the EU’s deregulated energy markets, power producers passed on the market value of allowances to consumers by adding the value of the allowances to energy rates.

The GAO also describes Europe’s international offset system, the Clean Development Mechanism, and notes the extreme difficulty in accurately calculating the worth of such investments in terms of emissions reduction. CDM investments are intended to prevent or lessen future emissions or factors such as deforestation which reduce the sequestration of greenhouse gases. Thus, the reductions are based against a hypothetical business-as-usual scenario, which cannot be precisely determined.

Citing the American Enterprise Institute, the Economist, and the editorial page of the Wall Street Journal, a group of environmental justice organizations including the California Environmental Rights Alliance (CERA) have come out in opposition to carbon trading schemes, in particular the European Union cap-and-trade system (the European Union Greenhouse Gas Emission Trading Scheme or EU ETS) and the Kyoto Protocol’s Clean Development Mechanism for investing in emissions reductions in developing countries. Major signatories include the Rainforest Action Network and the Los Angeles chapter of Physicians for Social Responsibility.

The declaration cites the windfall profits generated by the initial phase of EU ETS and argues that carbon trading “stands in the way of the transition to clean renewable energy technologies and energy efficiency strategies.” CDM is criticized for encouraging “carbon dumps” and financing “private industrial tree plantations and large hydro-electric facilities that appropriate land and water resources”.

The California Environmental Justice Movement will oppose efforts by our state government to create a carbon trading and offset program, because such a program will not reduce greenhouse gas emissions at the pace called for by the international scientific community, it will not result in a shift to clean sustainable energy sources, it will support and enrich the state’s worst polluters, it will fail to address the existing and future inequitable burden of pollution, it will deprive communities of the ability to protect and enhance their communities, and because if our state joins regional or international trading schemes it will further create incentives for carbon offset programs that harm communities in California, the region, the country, and developing nations around the world.

Signatories are below the jump.