20130524_R4

Source: BBC Radio 4: Today Programme

URL: N/A

Date: 24/05/2013

Event: "Europe's carbon market has effectively collapsed"

Attribution: BBC Radio 4

People:

  • John Humphrys: Presenter, BBC Radio 4: Today Programme
  • Simon Jack: Business journalist for the BBC
  • Stephen Tindale: Associate fellow, Centre for European Reform

John Humphrys: Now here's a big story - at least it sounds like a big story. Europe's carbon market has effectively collapsed. The thing is - what does that mean? Simon can explain.

Simon Jack: Thank you, John. If I'm a company that emits carbon, basically I get permits to do that. If I can then reduce the carbon that I emit, I can then sell some of my permits to someone else, so I've got an economic incentive to reduce my emissions. However, that relies on those permits being worth something. Back in 2006, they were worth 35 euros per tonne of carbon, now they're three euros per tonne. What does this mean for the climate change agenda? Stephen Tindale is from the Centre for European Reform, good morning to you.

Stephen Tindale: Good morning.

Simon Jack: What - why is there - why have they collapsed? This is because, basically, economic activity hasn't been as much, as strong as people thought. That's a good thing for the environment, surely.

Stephen Tindale: It's a good thing short term, although it's not a good thing in all sorts of other ways - employment, social policy, it's not.

Simon Jack: But from an environmental -

Stephen Tindale: But from an environmental point of view, it cuts carbon emissions this year, but the most important thing is to undertake the transition to a clean economy. And the collapse of the carbon market has meant that there isn't enough investment going into clean forms of energy. We all need energy - it's essential for life - and it needs to come from cleaner sources.

Simon Jack: And it's going to get worse, because the European Parliament has voted against limiting the issuing of new permits.

Stephen Tindale: The carbon market looks like it is going to get worse, although the vote is happening again in July, and the MEPs need to see sense and vote in favour of postponing some of the auctioning so that, actually, this year and next year it might not go down any further. But actually, the Commission needs to actually undertake structural reform of the emissions trading system, so that it does send a long-term price signal.

Simon Jack: What - they can do one of two things, presumably. They can remove some permits from the market or they could put a floor, a minimum value on them?

Stephen Tindale: Yes, the UK government is actually taking a sensible line on this, and has introduced a price floor. But, given that this is a Europe-wide trading system, that just means there'll be more permits available elsewhere in Europe. So it doesn't make much economic or environmental sense. So there needs to be a Europe-wide price floor.

Simon Jack: Stephen Tindale, thank you very much indeed.