Is the EU ETS a Just Climate Policy?

Abstract

The European Union Emissions Trading System (EU ETS) is in dire straits. Prone to design problems and suffering from the effects of the economic crises the scheme is criticised for its poor achievements. In this paper we will analyse some of the features of this situation from an ethical perspective. The major part is dedicated to the complications within each phase of the EU ETS and to the recent developments it has undergone. We will briefly discuss the remedies suggested by prominent commentators. Furthermore, any policy tool to tackle climate change should be evaluated in view of the profound equity issues that are inherent to the climate problem. We will evaluate the EU ETS according to two justice-based criteria, related to effectiveness and the distribution of the duties involved in climate change, respectively. We will conclude that the EU ETS, in its current form, clearly lacks fairness on both criteria. However, the biggest problem is the unwillingness of EU leaders to mend, what could be, a commendable climate policy tool. To that extent, we argue, those leaders are acting unjustly.

Keywords:

• climate change
• emissions trading
• EU ETS
• justice

Acknowledgement

The authors would like to thank Julian Cockbain and Johan Eyckmans.

Notes on contributors

Jo Dirix obtained an MA in Philosophy and Moral Sciences at the Free University of Brussels (VUB) in 2010. In 2011 he started his doctoral research at the Department of Philosophy and Moral Sciences at the same university, investigating the ethical dimensions of climate change from both a spatial and inter-temporal perspective.

In 2010 Wouter Peeters obtained an MA in Philosophy and Moral Sciences at the Free University of Brussels (VUB). Since January 2011 he is involved in a doctoral research project on climate justice at the Department of Philosophy and Moral Sciences of the Vrije Universiteit Brussel.

Sigrid Sterckx is a Professor of Ethics at the Department of Philosophy and Moral Sciences of Ghent University and a part-time Professor of Ethics at the Department of Philosophy and Moral Sciences of the Vrije Universiteit Brussel. Sigrid serves on several advisory committees, including the Belgian Advisory Committee on Bioethics.

Notes

1. Emissions trading systems are being, or have been, deployed in the EU, Australia, California, Alberta, RGGI (10 US states and 2 Canadian provinces), New Zealand, Mexico, China, Brazil, South Korea, Kazakhstan, UK, Norway, Switzerland, Tokyo, Japan and India (EDF 2013, World Bank 2014).

2.  The Market Stability Reserve would operate as follows: whether allowances are put in the reserve would be determined by the total number of allowances in circulation. An indicator would be set up judging which allowances in the market are not needed for compliance needs. Then, from 2021, 12 per cent of the total number of allowances in circulation may be placed in the reserve if and only if this amount is equal to or greater than 100 million allowances. The European Commission (2014b) argues that the 12 per cent and 100 million allowances-figures are reasonable ranges of the surplus that, according to relevant stakeholders, would enable an orderly functioning of the market. A predefined volume of 100 million allowances will be released from the reserve when (1) the total number of allowances in circulation in a given year is below 400 million; or (2) if, for more than six consecutive months, the carbon price is more than three times the average carbon price during the two preceding years.

3. See note 2.

4. Rawls (1999: 11–12) suggested that a utopia is realistic insofar as it reflects human morality and psychology, and a realistic utopia is utopian, in that it envisions a society not as it currently exists, but rather as it could be.

5. In order to find a balance between mitigation and compensation, and for the cost–benefit analysis to be applicable but not morally controversial, Davidson (2014) and Caney (2008) propose to apply a distinction in discount rates. Davidson (2014) argues that, in order to regain a reflective equilibrium between the deontological intuition of inviolable basic human rights and utilitarian economic theory, a zero consumption discount rate should be applied in the case of cost–benefit analysis of measures to prevent wrongful harm to future generations, while standard discounting should be used ‘in all other cases’ (Davidson 2014: 45). In the case of future harm, a zero discount rate will largely compensate future generations for climate change in the case of mitigation measures that do not pass the cost–benefit test. Caney (2008: 539) argues that the right not to be exposed to rights-violating climate change should be subject to a zero discount rate, which allows for the possibility that a positive discount rate might be applied to other values.

6. Caney's proposition abides by another criterion he has set out: a just mitigation policy will not impose intolerable restrictions on liberty (Caney 2010a: 200). Further discussion of this criterion, as well as a criterion regarding fair decision-making, falls beyond the scope of this paper.

7. If even the most extensive climate policy currently in existence (i.e. the EU ETS) is unjust, then this certainly holds for all the non-existing climate policies around the world. Nevertheless, our analysis indicates that even EU policy-makers should not be complacent.