Oops! Math Mistake Shows Europe’s Cap-And-Trade Scheme Simply Doesn’t Work

Andrew Follett


The European Union is set to emit 2 billion metric tons of carbon dioxide (CO2) more than it promised the United Nations due to an accounting problem.

A note from the European Commission, which The Guardian saw Monday, stated that Europe gave out too many permits for CO2 emissions, which threatened December’s international agreement in Paris that intended to limit global warming at 2 degrees Celsius.

Bas Eickhout, a Green Member of the European Parliament, told The Guardian Europe was “caught between a rock and a hard place” and that “current proposals are not consistent with what was agreed in Paris.”

The E.U. planned to control the amount of carbon dioxide emitted through a cap-and-trade system that sets a maximum amount of CO2 emissions that can be emitted each year. The government hands out Co2 permits to companies who can then sell these permits other companies who need them more. Each year, the government would reduce the amount of permitted CO2 emissions until global warming goals are reached.

The idea of cap and trade is to reward more environmentally friendly companies with tradeable credits, while encouraging others to “clean up” their act through a market.

The E.U. appears to have distributed too many permits, so the permit price is rising too slowly to cut CO2 emissions to the levels the government wants. Any attempt to reduce the number of permits to increase the price would spark anger from countries like Poland, which believes its industry would be unfairly hit.

Cap and trade schemes have a long history of not meeting their goals, and previous European attempts to create a cap-and-trade system actually caused CO2 emissions to increase due to scams and corruption. The previous scheme cost $287 billion through to 2011 and had an “almost zero impact” on the amount of CO2 emissions from the European Union, according to a study by UBS Investment Research.

Even environmentalists, such as the Executive Director of Greenpeace Annie Leonard, have called cap-and-trade a “multi-trillion dollar carbon racket” which creates “real incentives to cheat” and is a “dangerous distraction.” Even environmentalists who agree with the idea of cap-and-trade admit that actual examples of it fail because they “fall short of creating real price pressures due to its closeness to baseline emissions.”

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