Finalist for the region West (Wildcard team)
CLIMATE CHANGE IS COSTLY, BUT SO IS MITIGATION – PHASE X
As we discovered in our research, the European Emission Trading System poses as a great opportunity to fight climate change. However, there are also things to be fixed about it. In the following, we will try to explain to you how the European Emission Trading System works and what ought to be changed.
Since over time the number of outstanding certificates will be decreased, the price for an externality such as carbon dioxide will increase. What you would expect is a gradually rising price in the European Emission Trading System. Even though the system should have become stricter in the different phases, prices are not rising. Journalists call the current system broken or announced it failed. 1
As we identified both problems and opportunities, we came up with a plan to fix the European Emission Trading System. We call it PHASE X.
Since only European factories are bound to the emission trading system, we want to implement a carbon tax system into the European Emission Trading System. Products imported from countries without a carbon pricing plan will be charged with carbon tariffs. Since other countries will try to prevent overpaying, they are also incentivized to create a carbon pricing plan of their own urging a domino effect. Because if we don’t manage to treat all nations the same, the fight against climate change will fail.
Inequality has to be acted upon. When researching, we discovered another issue that states the incoherency of the European Emission Trading System just as much. Since not all sectors are bound to the European Emission Trading System, the price will be not as efficient as it could be. Other sectors get much of their certificates handed out very cheap due to free allocation. In all honesty: It makes no sense to praise market efficiency if you do not treat everyone equally. Therefore we concluded two more demands.
First of all, all sectors have to be covered by the European Emission Trading System. It is just unfair if some sectors get exceptions from what everybody has contributed to.
And second of all, there should not be any free allocation for the same reason. If some sectors get more free certificates than others, markets are not able to determine those places in the economy where it cost the fewest to save upon carbon dioxide.
1 Matthew Sinclair, Tax Payers Alliance, THE EXPENSIVE FAILURE OFTHE EUROPEAN UNION MISSIONS TRADING SCHEME https://www.cei.org/wp-content/uploads/2009/12/matt-sinclairs-ets-study-oct-09.pdf