Tim Yeo: Paris climate talks must allow emissions trading system to be linked
The chairman of Parliament's Energy and Climate Change Committee says a new global climate deal due to be agreed at the COP21 Paris meeting must allow for carbon trading between countries.
Veteran Conservative MP Tim Yeo believes the crucial COP21 summit in Paris should put in place a price on carbon, which would enable emissions trading systems around the world to link-up in future and ensure the world slashes climate-changing emissions in the most-effective way possible.
“Putting a price on carbon is absolutely essential if we are to curb the greenhouse gas emissions that cause climate change,” said Yeo. “But using taxes to set a carbon price does not guarantee any particular level of emissions reduction because the emitters may simply pay the tax and carry on polluting.
“Emissions trading allows us to set a cap on emissions and enables participating businesses to identify the most cost effective ways of reducing their emissions. Letting the market determine the price of carbon in this way is likely to be far more effective and politically palatable than carbon taxes.”
Weighing up costs
Emissions trading works by setting an enforceable limit, or cap, on the amount of greenhouse gas emissions that can be released from a group of emitters. Emitters then acquire permits (also called ‘allowances’ or ‘credits’) for every unit of emissions released through an auction, with the total amount of permits available set by government or a supra-national body like the EU.
Companies can then weigh the cost of measures to reduce emissions against the cost of buying permits and choose to either; cut their own emissions and sell the permits they do not need or buy surplus allowances from other firms who have.
Yeo, who is stepping down at the forthcoming election after being deselected by his local South Suffolk party, believes any agreement reached at the UNFCCC COP 21 in Paris at the end of 2015 must ensure that in future it will be possible to link the disparate regional, national and subnational emissions trading systems that have emerged around the world.
“A global carbon market would ultimately be the best way to keep the world within a safe carbon budget because it is one of the most economically efficient ways to reduce emissions,” he said. “Although there is no prospect of establishing emissions trading on a global scale in the immediate future, an international climate agreement that promotes carbon pricing and is favourable to linking represents the best chance of developing such a market in the long-term.”
“The world’s largest economies – China, the US and the EU – are already embraced emissions trading, so there are reasons to be hopeful about the prospects of progress in this area. But getting the framework right in Paris will be crucial if we want to make it easier for these emissions trading systems to link up in future.”
The current ‘hybrid’ approach in international climate negotiations – which combines top-down elements for establishing and reviewing targets, with bottom-up elements of pledge-and-review tied to national policies and actions – is welcomed by the MPs.
However, a new report from Yeo’s Committee argues that any new climate agreement must crucially allow parties to meet their Intended Nationally Determined Contribution’s (INDCs) by transferring parts of their contributions to other parties and financing emissions reduction activities in other countries.
The report – Linking Emissions Trading Systems – argues that the Paris talks could also play a critical role in providing basic standards including monitoring, reporting and verification, so that allowances are bought and sold in a transparent way and there is no prospect of double-counting.