Isra-Mart srl: Climate change policy is 'dead'

www.isra-mart.com

The climate policy of the European Union is now stuck in a dead end. Europe wanted to be the leader – showing the world the way. It wanted to export the "market-economic" instrument of emissions trading as a new standard of regulation. The climate summits in Copenhagen and in Cancun were supposed to herald a successor treaty for the 1997 Kyoto Protocol, which expires in 2012.

But both summits yielded zero results. Today it is clear that there is going to be no successor agreement. Also, the option of simply extending the existing Kyoto Protocol was thrown overboard by the main countries at the last G8 summit. The situation in global climate politics can be summarised in short as - there is no policy.

The emerging economies of Asia, especially, are refusing to allow their possibilities for growth to be curbed by obligatory CO2 reductions. Everywhere across the world, climate laws are being buried for good or put on ice. The once ballyhooed instrument of the emissions trading scheme is becoming obsolete. China, India and Australia are waving goodbye. In the US, the Chicago Climate Exchange was closed just after the last mid-term Congressional elections. Just before that, the self-anointed climate pope Al Gore cashed in by selling his shares.

"Climate politics is a dead project" is the buzz-phrase in Washington today. Yet, the EU is still clinging to all the measures and even discussing making them stricter than they already are. As a result, we are now left alone with the political costs of carbon reduction. We are ignoring international reality with an amazing level of tenacity.

As always - we continue to stick to the naive, worn-out argument: "Someone has to start the process." That start is a go-it-alone move. And if we do not wake up to that, then we will ruin our market economy with one-sided massive costs. Regarding industry, this process is happening slowly – almost as a creep. The Emissions Trading Scheme distorts competition to the disadvantage of European companies. As production in Europe becomes more and more costly, sooner or later industry will move to third countries - which do not have such a restrictive and costly climate policy. China and India, for example.

The consequences of the European solo mission become visible with the inclusion of airlines from third countries, into the ETS, in 2012. The row is just beginning to surface now. Since the EU wants to force airlines from third countries to participate, they are constantly taking action against it. Several third countries, such as America and China, went to court to fight this. But it is not just a question of law. A trade war recently started. China just blocked its order of the Airbus A380, in order to display its hostility against the ETS.

There is no way out of the dilemma. With the example of the inclusion of airlines in the ETS, the dimension of this problem becomes obvious. We are completely standing alone regarding the internationally non-enforceable climate measures and the costs are arising. The world is not a carbon market. It will never be one. The inclusion of airlines in ETS either ends in "war in the air", instigated by the EU or it will only be a factual Intra-European Emissions Trading Scheme - with clear disadvantages for European Airlines.

The latter situation is most likely. One of the only ways the European Commission can offer an olive branch is to meekly accept any reforms to the ETS, suggested by the third countries. The EU does not have any scope for negotiations. We have less pull than ever. And the consequences for the European aviation industry will be dramatic. The other option would be the modification of the ETS law. But then the commission would lose face.