Text 7 Fighting For the Planet

The giddy price of oil subsumed most talk of the environment in 2008; in 2009 the price of carbon will be the most pressing question. In America, the new president has pledged to cut emissions by institut­ing a cap-and-trade scheme: expect a drawn-out battle in Congress. Meanwhile, the European Union will be fine-tuning the rules for the next phase of its carbon-trading scheme. New Zealand is launching one too. And all around the world politicians will be debating how to update the Kyoto protocol, the United Nations’ treaty on climate change, a successor to which is supposed to be agreed upon at a summit in Copenhagen in December.

As with free-trade deals, the proliferation of regional and local carbon-trading schemes is likely both to spur efforts to reach a global accord and to complicate them. In America, ten north-eastern states have grouped to­gether to form the Regional Greenhouse Gas Initiative, a cap-and-trade scheme among utilities that starts run­ning on January 1st. Opponents of emissions-trading will hold up every glitch as an example of how mis­guided the whole concept is; proponents will insist it proves emissions-trading is viable, whatever its flaws.

Western states plan another, more ambitious pro­gramme, while Midwestern states are working on a third. To make matters even more complicated, several Canadian provinces plan to participate in the various American initiatives, in protest at the relative modesty of Canada's own national scheme. Australia and New Zealand will try to link up their respective systems. And there will be a row, complete with legal battles, over the eu’s plan to levy a carbon tax on flights to or from Eu­rope. As a negotiating stance, the regions and countries with more stringent policies will insist that national and global arrangements must not pander to the low­est common denominator. But they will also be quick to scale back their green ambitions if efforts to set up broader trading schemes founder.

All this uncertainty will not be good for the carbon markets. Prices will be volatile, providing more ammu­nition to those who dislike the idea of emissions-trading, in particular, the market for the sort of offset sanctioned by the Kyoto protocol will dry up, as buyers wait to see what the future holds. That will make life difficult for the firms that have sprung up to take advantage of the Clean Development Mechanism, as the offset provision is known, and so hamper the launch of a future global carbon market, if one is set in motion at Copenhagen.