Horrible, ghastly, nonsense in the carbon market



Under the scheme, any company or public sector organisation that consumes more than 6,000 megawatt hours (MWh) of energy a year – meaning a power bill of about £500,000 – must register its energy use by the end of next month. From April, firms will need to buy permits for each tonne of carbon dioxide emitted. For those using 6,000MWh, that could mean £38,000.

The scheme is intended to create a financial incentive to cut energy use, and those organisations that record the biggest reductions will get bonuses, funded by penalties imposed on those with the worst record.

Yes, this is indeed a complex and bureaucratic scheme to do something or other: it was devised by the previous government so of course it is complex and bureaucratic. But that isn't actually what is wrong with it. What is really wrong with it is that it is entirely unnecessary.

No, not unnecessary in the sense that climate change isn't a potential problem, nor in the sense that companies and business shouldn't be encouraged to reduce their CO2 emissions. Unnecessary in the sense that we've already solved this problem elsewhere.

Let us start from where the gorbal wormenists would state we are: excessive emissions are causing the earth to warm. This will impose costs on us in the future. We should therefore reduce emissions now: but this will impose costs upon us now. As the Stern Review points out, we need to balance the costs now against the benefits later. Too much now is as bad as too little now: we should try to ensure that costs and benefits balance.

In more detail, we should have either a carbon tax or a cap and trade system upon CO2 (and CO2 equivalent, CO2-e) emissions. These largely but not exclusively come from the use of fossil fuels. For those emissions that do come from the use of fossil fuels, specifically for those emissions that come from the use of fossil fuels for the generation of electricity, we have such a system. It's the European Union's cap and trade system, the EUTS. We also have, as a belt and braces sort of thing, the renewables obligation, which forces high prices to be paid for renewably generated electricity in order to subsidise this nascent industry.

Excellent, we're done. In fact, we're probably already more than done here as the costs of renewables as they are currently subsidised are more than the benefits of them which Stern says there will be in the future. But we are done: we've incorporated the costs of such emissions in the price of electricity already.

So, what we do not need is a further scheme which says to large electricity users that you should be paying the costs of your emissions from your electricity usage. For they're already paying those costs through their electricity bills. We are now double charging them: something which all of the literature on the subject, yes, including that very Stern Review, says we shouldn't be doing. For now we are increasing the costs of ameliorating future climate change to greater than the benefits which will come from said amelioration.

In short, we should be charging people for their emissions only once. We are already charging large electricity users for their emissions once and should not be charging them twice. Therefore this scheme should be scrapped.

Hopefully that's a sufficiently simple explanation that even Chris Huhne can understand it.