(Working Paper #6) Carbon Markets After Paris: Trading in Trouble

By Sean Sweeney - Trade Unions for Energy Democracy, March 11, 2016

The 2015 Paris Climate Agreement enshrines emissions trading schemes (ETSs) as a key mechanism for reducing emissions. But are ETSs effective?

Since the early 1990s, “putting a price on carbon” has been, perhaps, the primary policy proposal for fighting climate change by reducing greenhouse gas emissions. Whether through carbon taxes or “cap-and-trade” ETSs, proponents of carbon pricing see it as a way to guide investment toward green solutions without the need for more decisive government interventions. ETSs, in particular, have been favored by businesses and neoliberal policy makers seeking to limit emissions without disrupting business-as-usual.

It has been a decade since the European Union established the world’s largest ETS. In the long aftermath of the 2008-9 financial crisis, the price on carbon has been too low to incentivize investors to move away from fossil fuels.

Union Approaches

The European Trade Union Confederation (ETUC)—a supporter of the EU ETS—has called for policies that would raise the price on carbon while also expressing concern about “carbon leakage” —where companies move polluting activities (and associated jobs) to jurisdictions without price constraints on pollution. Such a position threads the needle of trade union debates around the EU ETS without resolving the underlying tensions—nor, it should be noted, shifting EU policy in any appreciable way. With the Paris Agreement giving an even more prominent role to carbon pricing, unions around the world are likely to face similar debates.

In the TUED Working Paper Carbon Markets After Paris, TUED Coordinator  Sean Sweeney argues that it is time for unions to reevaluate their stance on emissions trading. Market-based solutions may be appealing to business interests and their political allies, but it’s going to take direct governmental action to guide a transition to a just, democratic, and sustainable energy system and a low-carbon economy.  The now battered neoliberal consensus finds public and democratic ownership and control of a key economic sector to be anathema, but it is precisely what is needed if we are serious about combating climate change.

TUED Disclaimer: This paper represents the views of its author.  The opinions expressed here may or may not be consistent with the policies and positions of unions participating in TUED. The paper is offered for discussion and debate.

Disclaimer: The views expressed here are not the official position of the IWW (or even the IWW’s EUC) and do not necessarily represent the views of anyone but the author’s.