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Emission Trading

"Many Countries are More Concerned With Their Growth Targets"

July 3, 2012 | by SGI NEWS

While the report card remains modest, models such as emissions trading schemes continue to provide hope that global warming can be countered in a meaningful way. A discussion with Susanne Dröge, head of the Global Issues research group at the German Institute for International and Security Affairs, about a global struggle with a global problem.

SGI News: Early this summer, the Framework Convention on Climate Change celebrated its 20th anniversary. What would you say by way of congratulations?

Susanne Dröge © SWP

Susanne Dröge: Without a hint of irony? The Framework Convention on Climate Change has managed to put all the other environmental agreements, developed in the 20 years before Rio, in the shade. The fact that climate protection has made it to first place is, surely, a success story.

SGI News:
That sounds diplomatic. What should we read between the lines?

Dröge: Unfortunately, the substantial focus on climate protection distracts from other environmental issues. To a certain extent, some of these other issues have been subsumed by the climate aspect. In addition, there are areas in which climate protection has had undesirable effects – bio fuels are a classic example. After 20 years, it's possible to make a critical appraisal: The Framework Convention has trumped the entire environmental program of the United Nations – to that extent, it was very successful. In the process, however, other global environmental issues have disappeared from view.

SGI News:
Despite the significance of the Framework Convention, its returns seem rather modest: The climate protection targets formulated in the Kyoto Protocol are threatening to spiral out of reach. Why is the global community finding the fight against climate change such a struggle?

Dröge: It's nothing new to suggest that the issue is one of freeloading. Everyone wants to reap the benefits, but no one wants to bear the costs. Who would be willing to make a contribution without knowing what benefits will flow from it? Of course, some states are prepared to invest in climate protection, but a lot of countries are simply more concerned with their growth targets.

SGI News:
The SGI study 2011 of the Bertelsmann Stiftung rank countries on the basis of their CO2 emissions relative to their gross domestic product. What stands out in this ranking is that numerous European countries make it into the top ten: Sweden is at the head of the class, followed by Switzerland, Norway, France and Iceland. What is Europe doing right, and what role does the European emissions trading system play in that?

The first thing you have to look at is the energy mix of the individual countries. In Iceland, thermal energy from the ground plays a significant role, while France depends on nuclear energy. This is also the case in Sweden, though hydropower is also an important factor there. Obviously, these technologies allow CO2 emissions per unit of gross national product to be reduced. It has little to do with the European emissions trading scheme.

SGI News: Does that mean that the EU's emissions trading system has no measurable effects?

Well, of course it does. The emissions trading scheme has a cap, and that cap is fixed. A certain amount of emissions rights are received, or purchased, in each trading period. This mechanism allows a price to develop by way of supply and demand. That is the logic of emissions trading, as it has been implemented by the EU – following an American example, by the way. A sulphur dioxide trading system was set up on the Chicago stock exchange some time ago, but it wasn't a transnational system like that of the EU.

SGI News:
How do you rate the emissions trading system in Europe? There is certainly criticism of the system – what is that based on?

Dröge: Emissions trading is a success because of the limit it puts on the volume of emissions, alone. However, it appears that we were overly generous in setting the upper limits of emissions, that is the caps, which don't allow the development of prices that would make investment in climate friendly technologies especially appealing. You could always correct that. But the instrument itself has attracted criticism because all of a sudden, all sorts of other things have been connected to it: For example, investment in German energy and climate funds. In my view that is an issue, because it lends increasing significance to the price of emissions in this regard as well, thus increasing the temptation to influence the price.

SGI News: How can the EU emissions trading system be a model for a global climate trading system?

There is simply a lack of an international institution that could implement an emissions trading scheme like that. You would need to have a mandate, possibly under the UNFCCC (United Nations Framework Convention on Climate Change, Ed.), or even to set up an appropriate office especially for global emissions trading. For that reason, I can't see a copy of the EU model – that is, a model organised completely from the top to the bottom – being initiated at an international level for the time being. An international system would have to have a different design: Individual national emissions trading systems could connect with one another, that wouldn't be entirely unrealistic.

Interview conducted by Jörg Frommann

Translated from the German by Rogan O'Shannessy