As Europe moves closer to finalising the next phase of its cornerstone climate change policy, a surprising new model is gaining favour that recognises the severe danger posed to EU emissions reductions by impending economic recovery. The new policy, due to take over from the existing cap-and-trade emissions market when it expires in 2012, was previously expected to be a tightened-up version of its predecessor where companies are incentivised to reduce emissions by receiving a limited number of pollution permits which are freely tradable amongst participants. As evidence emerges that the second half of 2008 saw the most effective reduction in European emissions since records began, a new cap-and-stagnate scheme is being proposed that will safeguard Europe’s recent world-leading achievements in emissions reduction.
Under the new scheme, companies will be rewarded for achieving reductions in turn-over – with corresponding lower emissions – that exceed a Europe-wide recession benchmark. The plan has been given the snappy acronym REDD, which the EC explains stands for “Reduced Emissions from Demand Destruction”. The step is unexpected as until now the European Commission has been firmly opposed to including any kind of recognition for climate change effort through REDD mechanisms.
REDD was previously seen as a risky option for climate policy because of the risk of impermanence in emissions reductions caused by economic pain alone, as well as question-marks over whether this really constitutes a measurable mitigation effort by the companies involved. In what is seen by some as a hypocritical move, it appears likely that Europe will begin to allow recognition of emissions reductions from demand destruction within the Union’s borders, whilst remaining hostile to REDD efforts in developing countries. Critics have hit out saying that developing countries in sub-tropical regions with vulnerable economies would benefit more from REDD recognition than richer nations in Europe. When asked about these allegations, an EC spokesman was quoted as saying “There is no way that we can put our emissions reduction performance at risk by allowing economic recovery to continue unabated. The REDD incentive is one way to safeguard the reductions in the face of changing economic conditions”.
In response to the announcement, industries across Europe have apparently been falling over one another to demonstrate that their economic performance is collapsing more rapidly than the industry average, with companies competing to be the first to announce drastically reduced head-counts and slashed production schedules.