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co2 certificates

Encyclopedia entry - Nanine Roth - July 7, 2022 - 1 min reading time
CO2 trade

The idea was good, the implementation fails miserably: the big climate sinners benefit from EU emissions trading, the climate does not. WhyCO2 certificates don't work.

What are CO2 certificates?

The creators of European emissions trading had the following in mind: CO2-strong companies must compensate their carbon dioxide emissions with certificates. TheseCO2 certificates can be traded on energy exchanges. The emissions thus receive a market price. By capping the certificates, they should become more and more expensive, thus giving companies an incentive to invest in climate-friendly technologies.

What was the idea behindCO2 certificates?

EU emissions trading was formulated in 2005 with the idea that things are best regulated by the market itself. Since, in the capitalist system, only that which is tradable has value, the heating of the earth was to be given a value by companies in the future, and climate polluters were to be directly monetized. To give the climate a market factor, the EU createdCO2 certificates, also called pollution rights. Since then, for each ton of carbon dioxide, a power plant or industrial company has to buy certificates in energy exchanges and thus indirectly compensate for its own greenhouse gases.

Why don't theCO2 certificates work?

Reason 1: Large companies like RWE, which are among the EU's biggest polluters, stocked up extensively on certificates right from the start of the new regime. The EU's mistake: one of its most important instruments on the road to climate neutrality for the EU was not capped.
In fact, the number of allowances should have been equal to the amount of greenhouse gases that could just be tolerated so that Europe could meet its climate targets. But there were so many that the industry is still sitting on huge surpluses today.

Reason 2: Initially, the certificates were issued free of charge. Many large climate sinners benefited from this, but not the climate. When the prices for the certificates rose in 2018, the large energy groups and companies didn't care; they had hedged their bets early on.

Reason 3: So far, only power plants and industry have to participate in emissions trading. Two of the biggest emitters of greenhouse gases - agriculture and transport - are excluded.