On carbon pricing, policymakers are now thinking beyond emissions trading

By  Dave Keating

Changes taking place in the UK and US could force a rethink of the EU’s flagship climate policy, the Emissions Trading Scheme.

When the ETS was set up as the EU’s flagship climate policy in 2005, the concept had plenty of detractors. Many climate activists considered the market-oriented cap-and-trade approach to be deeply flawed, saying taxes would be more effective to reduce global warming emissions.

But cap-and-trade schemes were the global consensus at the time. When the first serious trading period began in 2008, America’s two presidential candidates, Barack Obama and John McCain, said they were going to adopt it in the US.

That didn’t come to pass. Obama couldn’t get his cap-and-trade proposal through the Congress, and it was abandoned. The EU, meanwhile, soldiered on with its system, without a large global partner to link to.

The EU Emissions Trading System (ETS) has suffered all kinds of problems since, most notably a too-low price of carbon.

After having a very low price for many years, the EU has been able to raise the price of carbon to almost €30 today after a controversial market intervention by policy-makers in 2014. But the global average carbon price is currently only $2 a tonne, way too low to trigger the kind of energy transformation needed to stop climate change.

Now, with the UK set to leave the EU ETS and replace it with something else such as a carbon tax, and the incoming US administration of Joe Biden sounding unenthusiastic about cap-and-trade, EU policymakers are being prompted to think about other ways to price carbon.

Continue reading further on the Euractiv website.