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90 development dialogue september 2006 – carbon tradingBut isn’t it the South and other parties currently not included in emissionstrading schemes that will reap more benefi ts, fi nancially speaking, as long asthey don’t have to pay for allowances?As of now, the biggest polluters are granted the maximum possibleadvantages relative to smaller polluters. It is they who hold rightsto the global carbon dump – not renewable energy system manufacturers,not non-polluting firms, not communities, not trusts, notcampaigners who have prevented hydrocarbon development in theirregions, not socially-responsible actors who have kept their societieson existing low-carbon paths, not (in Europe) the state sector, and notordinary members of the public, North or South.If emissions caps are tightened, moreover, when will they be tightened,and by how much? Politicians like to say that ‘market approaches’like emissions trading will prevent the pain of other kinds of regulation.But if there isn’t enough political pressure to reduce emissionsin the first place, the result will be merely a gaming of the system andcontinual over-allocation of pollution rights. Carbon trading doesnot offer a way around the tough political decisions.But surely some day the necessary political movement will come into being.And surely it will some day become more costly to emit carbon dioxide. Andwhen it does, renewable energy companies will win out, because demand fortheir products will rise.It’s going to be a tough slog for renewable energy companies in themeantime, as long as they are deprived not only of the large subsidiesand research and development money that continue to go into ‘sunset’fossil fuel and nuclear technologies, but also of any assets handedout under emissions trading schemes. 80Well, all right. But I still can’t get my head around the idea that the KyotoProtocol and the EU ETS are simply ‘polluter earns’ programmes. After all,it’s not as if European utilities, oil companies and steel manufacturers are justbeing handed free cash to do whatever they want with. They have to use theirallowances to cover their emissions, no? They’re not making any money outof them.Well, it’s funny you should mention that, because, actually, manyof them are. As Garth Edwards of Shell explains, the ‘opportunitycost of allowances is incorporated into the power price in countrieswith liberalised energy markets... . The largely free allocation of allowancesmeans that power generators receive a windfall profit sincetheir compliance costs are far less than their revenue increase’ 81 fromincreased consumer prices.