The billion-pound cost of badly-drafted green taxes

Alex Hern reveals the flaws of the EU's emissions trading system, which has numerous provisions which cost billions and do nothing to reduce pollution.

The EU is paying billions of pounds to foreign corporations to produce and then destroy greenhouse gases due to a loophole in the emissions trading scheme, according to a report from the think tank Civitas released this week.

The clean development mechanism (CDM) is a subset of the emissions trading scheme designed to encourage developing nations to clean up their industry. Emission credits, CERs, are generated by emission reducing projects outside of the EU and can be sold on, to encourage green investment.

Owing to the fact that some greenhouse gases are far more damaging than carbon dioxide, extra credits are given for reducing those emissions. One, HFC-23, a gas found in coolers, is 11,700 times more damaging, and so credits worth 11,700 tonnes of carbon are given for every tonne destroyed.

This means that a gas that costs only €0.17 per tonne of CO2-equivalent to destroy creates credits worth €12 for every tonne.

As Civitas reports:

Little wonder then that some firms, especially in China, now create refrigerant gases just to create the HFC-23 that they then destroy, to reap the rewards.

Indeed, of the largest ten generators of CERs, seven are HFC destruction facilities, showing just how lucrative a system it is.

Having cottoned on to this, the Chinese government has also been making a significant sum out of the scheme.

It charges a 65 per cent tax rate on HFC-23 CDM profits, which goes into a supposed ‘sustainable development fund’, the purpose of which is unclear. It has been estimated that, by 2012, the Chinese government will have generated $1.7 billion [£1.1 billion] from the tax.

This loophole was eventually banned in January last year, but the ban will only take effect from May 2013, “as a result of intense lobbying pressure from various organisations.”

The lesson to learn from this issue is that getting support for green taxes is only half the battle. If the drafting of the bills is left to the businesses and special interest groups, then this sort of problem will be endemic.

Green taxes must, first and foremost, reduce emissions. If they don’t, then they must be opposed, not supported, by environmentalists.

See also:

Tabloid attacks on green movement mean we have to raise our gameReg Platt, November 29th 2011

On the Financial Transaction Tax, why is Osborne on the side of the one per cent?Shamik Das, November 2nd 2011

Gideonomics: A rogue chancellor fails to run the greenest government everEleanor Besley, October 19th 2011

The challenges facing new transport secretary Justine GreeningRichard Hebditch, October 17th 2011

Exclusive: 98 of the FTSE 100 companies are addicted to tax havensAsha Tharoor, October 11th 2011

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14 Responses to “The billion-pound cost of badly-drafted green taxes”

  1. Patron Press - #P2

    #UK : The billion-pound cost of badly-drafted green taxes http://t.co/aWo757ro

  2. chris paling

    The billion-pound cost of badly-drafted green taxes: http://t.co/0OOIG3pk by @alexhern

  3. Anonymous

    It’s rent seeking. Getting the government to do your dirty work and screw someone over for money.

    It applies to failed bankers, to benefits claimants in Kensington on 170K a year

    It applies to the Greens wanting massive subsidies in order to profit. The reverse Robin Hood. Taking money from the poor to give to the rich. In the process people are in fuel poverty, and being cold kills people.

    The common factor is politicians.

    Just shows that government is the problem, not the solution.

  4. Civitas think tank

    David Merlin-Jones' report CO2.1 and the billion pound cost of emissions trading discussed @leftfootfwd http://t.co/uAE4PpUg

  5. Environmentalist Inc

    The billion-pound cost of badly-drafted green taxes: The EU is paying billions of pounds to foreign corporations… http://t.co/N6MsIVlM

  6. leftlinks

    Left Foot Forward – The billion-pound cost of badly-drafted green taxes http://t.co/NSuyxohn

  7. Charlie Samuda

    I agree with @alexhern about dangers of seeing GHG emissions trading as a panacea when energy firms exploit loopholes http://t.co/mHmmtE75

  8. tax break

    The billion-pound cost of badly-drafted green taxes: It has been estimated that, by 2012, the Chinese government… http://t.co/fgjQdkbi

  9. Powerbase

    The billion-pound cost of badly-drafted green taxes | Left Foot Forward http://t.co/xFumYACF

  10. Spinwatch

    The billion-pound cost of badly-drafted green taxes | Left Foot Forward http://t.co/uhKTM9mo

  11. Knut Cayce

    RT @leftfootfwd: The billion-pound cost of badly-drafted #green #taxes http://t.co/NyWevZWk #CO2

  12. Valueofnothing

    This is a good article but neither the ETS nor the CDM are taxes and it is a bit lazy to confuse them. Actually a move away from trading schemes to taxes would be a good thing and a good thing to write an article about.

  13. Newsbot9

    Oh yes, because a roof over your head is evil.

  14. Lord Blagger

    Noting like taking 170K a year from the poor so you can live like Tony Blair.

    Socialism in action.

    Some are more equal than others.

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