The European Emission Trading Scheme has been getting about as much bad publicity as BP recently. The latest hounding comes from Times columnist, Camilla Cavendish, who attacks the ETS in a good old fashioned rant.

She says: “Those of us who have been shouting into the wind for years about melting glaciers, wilting polar bears and rising tides are feeling strangely becalmed. For the political climate has changed. Global warming is fashionable. The world reverberates to the sound of a million new paper-rustling committees. But the flurry of activity brings few useful results. China goes on its stately way building one coal-fired power station every week. Europeans proudly refuse a plastic bag at the checkout — the latest way to look green — then rent an air-conditioner to stave off the heatwave. It is a paradox that environmentalists never expected: everyone knows that there is a problem, but no one will do anything about it.”

“A prime example of ineffective bluster has been the EU’s scheme for emissions trading. The idea was brilliant: let companies trade permits to pollute. Take carbon out of the atmosphere in the most cost-effective way possible, by creating an artificial scarcity. Encourage companies that can clean up their act most cheaply to do so and sell their permits to others. Then gradually ratchet down the number of permits, making it more and more expensive to use fossil fuels”.

Last year, Cavendish points out “the first year of the scheme, 21 out of the 25 member states made a mockery of it by handing out permits for more CO2 than was emitted. The upstanding UK had handed out fewer permits relative to its emissions than anyone else … the money should have been spent on upgrading some boilers somewhere, not on — what? — oil executive’s salaries? The German Environment Minister has accused his country’s four largest power producers of using the scheme to stoke up their earnings by between £4billion and £6billion”.

She argues that “this scheme is currently all pay for no performance. Europe still spends billions to subsidise the production of coal, which is the most CO2-intensive form of energy generation. The power company RWE is building a giant brown coal plant near Düsseldorf. The German Government — no surprise — is pressing for brown coal to get favourable treatment from the emissions regime. The Italians are apparently even hoping to subsidise the permits that allow companies to get points by paying for clean technologies in China and India. These governments have to break free of the systems that reward vested interests for doing harm.

“In typical double-speak, the European Commission presented the over-supply of permits last month as, “Good news for the environment: CO2 emissions were lower than anticipated in 2005.” But what matters for global warming is whether greenhouse gas emissions are falling. And they’re not. The whole point of creating a carbon market is to create a price for carbon that will encourage businesses to invest in cleaner technologies. An oil company may only replace its plant every 40 years. It needs long-term clarity if it is to move to a radical alternative. Yet in the EU’s new carbon market, the price of a tonne of CO2 plummeted from 32 euros in October to 9 at the end of April. At that price, no one in their right mind is going to invest in alternative technology. All the evidence suggests that Europe is using dirtier fuel than two years ago, largely because gas has become much more expensive than coal”.

She finishes by arguing: “EU bureaucracy and protectionism are intensely irritating, but it is essential to develop a carbon market that works on a European scale, for the great hope is to build one that is truly global. James Cameron, head of the carbon broker Climate Change Capital, sees a future in which Western steel manufacturers and utilities pay to build biomass and solar power in China. “We have one atmosphere, it is very thin and very delicate and it doesn’t matter where you take out the tonnes of carbon but it does matter when. Now is good.” Amen to that”.