Climate change policies have been based on neo-liberal, “free market” principles at least since the 1992 Rio Earth Summit, that launched international environmental agreements on biodiversity, climate change and desertification.

Twenty years ago, those Rio Earth Summit agreements assumed that the “liberalisation” of world trade – ie opening world markets to international trade without protection from tariffs- would work hand in hand with international environmental regulation.

This approach doesn’t seem to have worked – carbon emissions, the average global temperature and sea levels have gone on rising – but climate change policy is still geared to free market principles. The United Nations-brokered climate change policies that have emerged from nearly twenty years of followup to the 1992 Earth Summit are so tied up with neo-liberal financial institutions and transnational companies, that some climate activists now question whether it makes sense to go on taking part in UN climate talks.

Here is a summary of climate change since the 1992 Rio Summit, based on United Nations Environmental Programme information.

The problem with the Kyoto Protocol is that it focusses on fossil fuel consumption, not supply

The Kyoto Protocol spells out how various countries around the world have committed to reduce and adapt to climate change. Its main weakness is that it only addresses how to reduce consumption of fossil fuels. It completely overlooks how to reduce the production and supply of fossil fuels.

There are only a few thousand sources of oil production (oil fields and wells) in the world, compared to many millions of points of consumption (cars, houses, factories etc). So it would be far easier to regulate oil production. Regulation of most other environmental problems like overfishing or ozone-depleting substances have focused on the production side, rather than consumption. So why not make oil and coal production the focus of the Kyoto Protocol and its successor – if there is one?

The Kyoto Protocol expires at the end of 2012 and by now it’s become a zombie. According to the World Development Movement, the Protocol now only covers the European Union countries and a handful of others, has lost its legally-binding status and is no more than a bunch of voluntary pledges. The Rio + 20 summit in June 2012  failed to come up with anything effective to replace it – with Nick Clegg blaming China and other countries for the failure.

European Union and UK government climate policies

Current European Union and UK government carbon reduction and energy policies are based on the idea that man made carbon emissions result from market failure. Businesses have avoided paying the costs of damaging climate change, caused by their carbon emissions, so they’ve had no reason to stop the emissions.

So these policies assume that the way to solve the problem is to make the market work properly. For example, the Climate Change Act 2008 basically introduces various “market” mechanisms, and proposes that they will serve to reduce UK carbon emissions.

With the Climate Change Act, the UK became the first country in the world to introduce legally binding targets to reduce carbon emissions reduction. The secretary of state for the Department of Energy and Climate Change has a duty to make sure that the UK’s carbon emissions for 2050 is at least 80% lower than the 1990 baseline.

The Act also created the Committee on Climate Change, an independent, appointed body that advises the government on climate change. It sets five year carbon budgets. Its most recent carbon budget requires the UK to reduce emissions by 50% on 1990 levels by 2027. The Committee recently warned that the UK risks failing to meet its legally binding carbon reduction target.

The Climate Change Act assumes market forces will solve the problem of climate change

It’s good that the Act requires the UK government to take action to reduce carbon emissions and tackle climate change. The problem is that the Act’s proposed solutions are almost entirely market-based. This seems a bit strange – the Stern Review, which the Act is based on, said that climate change was caused by market failure. It pointed out that  companies have felt free to pollute the atmosphere with greenhouse gases because they’ve been able to avoid paying for the costs of the damage this causes. Instead, they’ve passed the costs on to the public and the government.

If the market has failed and this has caused climate change, isn’t it a bit weird to expect the market to put the problem right? The Climate Change Act seems to assume that government can make the market work, and all will be well.

European Union Emissions Trading Scheme

As if we weren’t already suffering from crazy financial instruments which no-one understands, the European Union climate change reduction policy is based on the Emissions Trading Scheme (ETS), which sets a cap on carbon emissions for certain sectors of the economy and allows businesses to buy and sell carbon emissions permits.

These videos  are about why emissions trading schemes (also known as cap and trade) and carbon offsets don’t work. They’re American, but the situation there with cap and trade/emissions trading mirrors the European Union situation with the ETS.

The carbon emissions – polluting corporations have captured the policy makers

Major carbon emissions polluters have strongly lobbied the EU and the UK government and seem to have effectively determined ETS policy so that it serves their own  interests.  Dieter Helm, a Professor of Energy Policy at Oxford University, calls this “regulatory capture” and comments on the way this has created a “carbon pork barrel” – in other words, a way for polluters to pig out on what are basically unearned profits from trading via financial “instruments” like the EU Emissions Trading Scheme.

The fact that corporations basically dictated the terms of the EU Emissions Trading Scheme meant that the EU Commission allocated carbon emissions permits to polluting companies on the basis of their current emissions – rather than on the basis of reduced levels of carbon emissions. This is called “Grandfathering”. It’s resulted in an over-supply of carbon emissions permits (called EU Allowances or EUAs), which means they trade at such a low price that they don’t provide an incentive for companies to shift to clean energy. The EU Parliament has now decided that the EU Commission should withhold new carbon emissions permits from the Emissions Trading Scheme in 2013, in order to push up their price. Whether this will actually happen is anyone’s guess.

Calls to scrap the EU Emissions Trading Scheme

The Scrap the EU ETS Declaration lists the many structural flaws of the EU ETS and the risks of trying to fix them. It calls for the EU ETS to be scrapped and make way for effective climate change mitigation policies.

Your eyes may be glazing over – but this stuff matters! Companies have not only captured the process of policy making through lobbying – perverting the democratic process – but are also seconded into government departments like the Department of Energy and Climate Change, where they influence energy policy in line with their own interests.

Other climate change reduction activities that the Climate Change Act authorises

The Act gave legal authority for:

• many key areas of local government climate change reduction activity
• the Carbon Reduction Commitment (CRC) energy efficiency scheme, which requires large organisations to report their annual carbon emissions and charges them £12 for every tonne they create
• Feed in Tariffs (FITs)
• waste reduction schemes

Section 85 of the act requires the environment secretary to introduce mandatory carbon reporting for businesses by 6 April 2012, or to explain why she is not doing so. But the Defra secretary has tabled a report in the House of Commons library stating that “No decision has yet been reached” on introducing mandatory carbon reporting for businesses.