19 March 2014: Setting standards

Yesterday, I went to a seminar on European energy policy. We discussed the ETS and an EPS in the IED to promote CCS. That is a sentence which will be meaningless to anyone outside the energy policy wonk world. Nothing wrong with that world – I’ve lived in it for a quarter of a century. But most people don’t. It’s time to move beyond the TLAs (three letter acronyms) and talk human.

So, people at the seminar agreed that the attempt to use the market to promote efficiency and clean energy by charging polluters for greenhouse gas emissions has pretty much failed. (That’s the Emissions Trading System, ETS.) Many participants argued for an Emissions Performance Standard (EPS) to replace it. This standard would limit the amount of pollution that a power station is permitted to emit per unit of electricity production. The Canadian and British governments have introduced one, and the US is doing so. The EU should do so too.

The Centre for European Reform published my paper recommending this last year (see CER: Europe should regulated to promote carbon capture and storage).  I used the word “regulate”, because I like regulation. It delivers definite outcomes – if properly enforced – and makes markets deliver public interest benefits. But I’m a left-of-centre social democrat. Right-of-centre politicians and policy-makers are less keen on the word ‘regulation’. They tend to equate it with red tape and barriers to innovation and economic growth. Many right-of-centre governments have in practice introduced good regulations. But we’re talking words here.

Tony Blair, who led a left-of-centre party but wanted to make it pro-business, came up with the phrase ‘Better Regulation (which led, inevitably, to the Better Regulation Unit, BRU). Classic third way stuff: accept regulation to please the left, but promise to improve it to please the right. However, the language of politics have shifted since Blair left office. In the Conservative party, supporters of any regulation are increasingly hard to find. I once attended a speech by David Willets, minister for universities and skills.  He criticised all the ‘red tape’ blocking innovation, so I asked him if he thought that regulation could ever spur innovation. There’s lots of academic literature demonstrating where this has happened (for example, on air pollution equipment or chemicals). I expected “two brains” Willets to reel off some examples. But he didn’t. Perhaps he thought it politically unwise to say anything in favour of regulation on a public platform

So maybe calling for new regulations is not politically sensible. Maybe it would be more sensible to call an Emissions Performance Standard just that, a standard. Nobody can be against standards. It could be a Carbon Standard. But that is the name of the verification process of an international offsetting scheme. (And life is too short to try to explain that in plain English. Sorry.) How about a Greenhouse Gas Standard?

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