Energy, Climate and the Environment Series Editor: David Elliott, Emeritus Professor of Technology Policy, Open University, UK Titles include: Claire Dupont and Sebastian Oberthür (editors) DECARBONISATION IN THE EU Internal Policies and External Strategies Espen Moe RENEWABLE ENERGY TRANSFORMATION OR FOSSIL FUEL BACKLASH Vested Interests in the Political Economy Manuela Achilles and Dana Elzey (editors ) ENVIRONMENTAL SUSTAINABILITY IN TRANSATLANTIC PERSPECTIVE A Multidisciplinary Approach Robert Ackrill and Adrian Kay (editors) THE GROWTH OF BIOFUELS IN THE 21ST CENTURY Philip Andrews-Speed THE GOVERNANCE OF ENERGY IN CHINA Implications for Future Sustainability Gawdat Bahgat ALTERNATIVE ENERGY IN THE MIDDLE EAST Ian Bailey and Hugh Compston (editors) FEELING THE HEAT The Politics of Climate Policy in Rapidly Industrializing Countries Mehmet Efe Biresselioglu EUROPEAN ENERGY SECURITY Turkey’s Future Role and Impact Jonas Dreger THE EUROPEAN COMMISSION’S ENERGY AND CLIMATE POLICY A Climate for Expertise? Beth Edmondson and Stuart Levy CLIMATE CHANGE AND ORDER The End of Prosperity and Democracy David Elliott (editor) NUCLEAR OR NOT? Does Nuclear Power Have a Place in a Sustainable Future? Neil E. Harrison and John Mikler ( editors) CLIMATE INNOVATION Liberal Capitalism and Climate Change Antonio Marquina (e ditor) GLOBAL WARMING AND CLIMATE CHANGE Prospects and Policies in Asia and Europe Espen Moe and Paul Midford (editors) THE POLITICAL ECONOMY OF RENEWABLE ENERGY AND ENERGY SECURITY Common Challenges and National Responses in Japan, China and Northern Europe Marlyne Sahakian KEEPING COOL IN SOUTHEAST ASIA Energy Consumption and Urban Air-Conditioning Benjamin K. Sovacool ENERGY & ETHICS Justice and the Global Energy Challenge Joseph Szarka, Richard Cowell, Geraint Ellis, Peter A. Strachan and Charles Warren ( editors ) LEARNING FROM WIND POWER Governance, Societal and Policy Perspectives on Sustainable Energy Thijs Van de Graaf THE POLITICS AND INSTITUTIONS OF GLOBAL ENERGY GOVERNANCE Xu Yi-chong (editor) NUCLEAR ENERGY DEVELOPMENT IN ASIA Problems and Prospects Energy, Climate and the Environment Series Standing Order ISBN 978–0–230–00800–7 (hb) 978–0–230–22150–5 (pb) You can receive future titles in this series as they are published by placing a standing order. Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and one of the ISBNs quoted above. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, UK. The Rise and Fall of Carbon Emissions Trading Declan Kuch Research Fellow, University of New South Wales, Australia © Declan Kuch 2015 Softcover reprint of the hardcover 1st edition 2015 978-1-137-49037-7 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2015 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-57796-5 ISBN 978-1-137-49038-4 (eBook) DOI 10.1057/9781137490384 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Kuch, Declan, 1982– The rise and fall of carbon emissions trading / Declan Kuch. pages cm—(Energy, climate and the environment) Includes bibliographical references. 1. Emissions trading. 2. Carbon offsetting. 3. Carbon dioxide mitigation. 4. Environmental policy. I. Title. HC79.P55K83 2015 363.7389747—dc23 2015012930 To my family Contents Series Editor’s Preface viii Acknowledgements x List of Abbreviations xii Introduction 1 1 The Rise of Emissions Trading as a Market Mechanism and the Promise of ‘Civilized Markets’ 1 3 2 Marketizing Civil Regulation: Acid Rain Regulation as the Experimental Bridge to Carbon Markets 2 9 3 Governing Carbon Emissions: NSW GGAS 6 0 4 The Technopolitics of National Carbon Accounts 9 5 5 ‘Economists in the Wild’: Clean Development and the Global Politics of Carbon Offsets 1 20 6 The Paradox of Measurable Counterfactuals and the Fall of Emissions Trading 148 Conclusion: Beyond 8%: Resituating Emissions Trading 163 Notes 170 References 1 84 Index 2 05 vii Series Editor’s Preface Concerns about the potential environmental, social and economic impacts of climate change have led to a major international debate over what could and should be done to reduce emissions of greenhouse gases. There is still a scientific debate over the likely s cale of the severity of climate change, and the complex interactions between human activities and climate systems, but global average temperatures have risen and the cause is almost certainly the observed build-up of atmospheric greenhouse gases. Whatever we now do, there will have to be a lot of social and economic adaptation to climate change – preparing for increased flooding and other climate-related problems. However, the more funda- mental response is to try to reduce or avoid the human activities that are causing climate change. That means, primarily, trying to reduce or eliminate emission of greenhouse gases from the combustion of fossil fuels. Given that around 80 per cent of the energy used in the world at present comes from these sources, this will be a major technological, economic and political undertaking. It will involve reducing demand for energy (via lifestyle-choice changes – and policies enabling such choices to be made), producing and using more efficiently whatever energy we still need (getting more from less), and supplying the reduced amount of energy from non-fossil sources (basically switching over to renewables and/or nuclear power). Each of these options opens up a range of social, economic and envi- ronmental issues. Industrial society and modern consumer cultures have been based on the ever-expanding use of fossil fuels, so the changes required will inevitably be challenging. Perhaps equally inevitable are disagreements and conflicts over the merits and demerits of the various options and in relation to strategies and policies for pursuing them. These conflicts and associated debates sometimes concern technical issues, but there are usually also underlying political and ideological commitments and agendas that shape, or at least colour, the ostensibly technical debates. In particular, technical assertions at times can be used to buttress specific policy frameworks in ways that subsequently prove to be flawed. The aim of this series is to provide texts that lay out the technical, environmental and political issues relating to the various proposed poli- cies for responding to climate change. The focus is not primarily on the viii Series Editor’s Preface ix science of climate change or on the technological detail, although there will be accounts of the state of the art to aid assessment of the viability of the various options. However, the main focus is constituted by the policy conflicts over which strategy to pursue. The series adopts a critical approach and attempts to identify flaws in emerging policies, proposi- tions and assertions. The present text certainly looks at an area where there is no shortage of disagreement about policies – the attempt to develop a carbon trading system in Australia. The highly charged political context is provided by its coverage of the introduction in 2012 of a greenhouse-gas emis- sions trading scheme and its subsequent demise following a change of government. Carbon trading is seen by some as a market mechanism that ought to appeal to those on the political right, but it is also inevi- tably seen as device for reducing fossil fuel use, and thus is suspect to those who do not believe that climate change is man-made. The polari- zation of views seems very strong in Australia, which, although ideally situated to exploit solar energy, is heavily dependent economically on its fossil-fuel extraction activities, while also suffering from increasingly extreme weather episodes. However, even within the context of looking to amelioration and mitigation measures, there are disagreements about how best to proceed. The EU Emissions Trading System (EU-ETS) has demonstrated that, without tight carbon caps, emission reduction will be limited. Within the EU there are still calls to try to rescue the EU-ETS, but devising effective schemes that can work in politically charged situ- ations is not easy. That is one of the lessons provided in this book in relation to the fate of the Australian system. With climate and energy policy there and, indeed, around the world, still very much in flux, this is a very timely overview of the issues, from both a practitioner’s and analyst’s perspective. David Elliott Emeritus Professor of Technology Policy, Open University, UK