Article 6 or 20 – “Creating the UK emission trading scheme: motives and symbolic politics”

This superb article –

Nye, M., & Owens, S. (2008). Creating the UK emission trading scheme: motives and symbolic politics. European Environment, 18(1), 1–15. doi:10.1002/eet.468 

has really helped me get my head around both some key events (my brain seems to work on empirics/timelines first, theory second, at least sometimes) but also key debates and actions… I will need to keep coming back to it, not because it is written badly (it’s written very clearly) but because I am on a bumpy learning curve.

This is about what happened between 1998 and 2001, when corporate actors tried to head off a carbon tax, by proposing an emissions trading scheme. The outcome was … mixed.

Some quotes (the whole article is fabulous. Did I mention that?)

The UK Emissions Trading Scheme (UK ETS) examined here was created between 1999 and 2002, in what was a period of widespread optimism and faith in the efficacy of ‘new economic policy instruments’ (NEPIs) (Smith, 2002; Jordan et al., 2003). The UK ETS was a voluntary, incentivised scheme covering a basket of six greenhouse gases, measured in equivalence to carbon dioxide (CO2e) (DEFRA, 2001b; 2001c). On average, each of the 33 direct participants in the UK scheme made a commitment to reduce their emissions by roughly 12% from their 1998–2000 baselines, creating an aggregate reduction of 12 million tonnes of CO2e from 2002 to 2006 under the emissions cap (DEFRA, 2001c).

(Nye and Owens, 2008; 2)

It is argued here that, regardless of its neo-classical rationality, UK emission trading represented much more than a market to its participants. Symbolic politics and political manoeuvring ahead of real and threatened legislation drove industry interest in emission trading despite serious compatibility issues with other policies. Ultimately, business interests were able to achieve only a compromised trading scheme, which did not deliver on their economic interests, but which did satisfy a range of symbolic motives in specific legislative and practical contexts. These arguments are based on a series of in-depth interviews carried out from 2003 to 2005 with business representatives and government officials involved in the UK Emissions Trading Group (ETG) and, more generally, in UK emission trading.

Interviewees included representatives from 18 of the direct participants in the UK ETS, four senior members of the UK ETG and four government offi cials involved with the creation and management of the scheme. The interviews focused on three central themes: motives for supporting emission trading, activity in the emission market and the perceived value of the scheme.

(Nye and Owens, 2008; 2)

Through voluntarily surrendering some level of autonomy over an environmentally significant business practice, fi rms may avoid more unpleasant, and perhaps less malleable, mandated standards in future. However, it is also important to recognize that achieving the diffuse social and economic benefits of voluntary public greening may not require a signifi cant operational commitment, provided that a green impression can still be created at the political level (Forbes and Jermier, 2002).

(Nye and Owens, 2008; 3)

Our interviews with members of the UK Emissions Trading Group reveal similarly symbolic motives for the industry-led advocacy of emission trading. However, the motives for policy advocacy differ in important ways from those driving participation in the fi nal scheme. In this paper, we explore the former in more detail, tracing the ways in which their evolution and signifi cance to industry were shaped by political and social contexts as well as more traditionally recognized economic considerations. We pay particular attention to the differences between industry’s original intentions for emission trading and what could ultimately be achieved given existing policy and political arrangements, and to the ways in which this disparity shaped the fi rms’ understandings of the value of emission trading.

(Nye and Owens, 2008; 4)

In addition to Kyoto requirements, New Labour had promised to cut domestic emissions of CO2 by 20% below 1990 levels by 2010 as part of its election platform (New Labour, 1997). In 1998, the government asked the infl uential Advisory Committee on Business and the Environment (ACBE) for an opinion on climate change regulation and best practice climate change policies for UK business. The ACBE response was overwhelmingly in favour of the creation of a domestic, business-to-business trading scheme (ACBE, 1998). As a follow-up to the ACBE consultation, the government later commissioned Lord Marshall (then chairman of British Airways) to create a consultation document on economic instruments and the control of business energy use.

(Nye and Owens, 2008; 4)

In addition to Kyoto requirements, New Labour had promised to cut domestic emissions of CO2 by 20% below 1990 levels by 2010 as part of its election platform (New Labour, 1997). In 1998, the government asked the influential Advisory Committee on Business and the Environment (ACBE) for an opinion on climate change regulation and best practice climate change policies for UK business. The ACBE response was overwhelmingly in favour of the creation of a domestic, business-to-business trading scheme (ACBE, 1998). As a follow-up to the ACBE consultation, the government later commissioned Lord Marshall (then chairman of British Airways) to create a consultation document on economic instruments and the control of business energy use.

(Nye and Owens, 2008; 4)

The announcement of the CCL and the conclusions in the Marshall report provoked a somewhat cool response from some business leaders (Smith, 2002; Hansford et al., 2004; Bailey and Rupp, 2004; HOC, 1999). In July 1999, a UK Emissions Trading Group (UK ETG) was formed by several influential UK businesses. In its offi cial capacity, the UK ETG was a joint effort of the Confederation of British Industry and ACBE to represent the case for emission trading in the UK (UK ETG, 1999).6

Unofficially, it was a politically well heeled advocacy coalition (see Sabatier, 1988) with a core of elite business representatives determined to put emission trading back on the policy agenda after Marshall’s less than favourable report. Through close collaboration with several key government officials, the business members of the UK ETG created two draft proposals for a UK Emissions Trading Scheme that were submitted to government in September 1999 and March 2000 (UK ETG, 1999, 2000b; DEFRA, 2000).

(Nye and Owens, 2008; 5)

The government reacted favourably to the draft proposals, producing a consultation document on a domestic UK ETS in November 2000 that not only recognized the primary role of business in negotiating and designing the framework for a scheme through the UK ETG, but also indicated that government was largely willing to accept the desire on the part of industry for a full scale scheme (DEFRA, 2000).

The UK ETG continued to work closely with government on the specific parameters and design of the UK ETS until the scheme was formally drafted by DEFRA in October 2001.

(Nye and Owens, 2008; 5)

Perhaps the most direct pathway to understanding the ETG’s early support for emission trading is to examine its core membership in more detail. According to one interviewee, the UK ETG began relatively quietly as a series of meetings between senior personnel from BP, Blue Circle/Lafarge and British Gas:

“Essentially, there was a triumvirate I suppose of [names omitted] from British Gas, BP, and Blue Circle. And the three of us, when this was first mooted that we should have an Emissions Trading Group which would try and push to establish a scheme, the method of working and how we would approach it was agreed between the three of us (founding member of the UK ETG).

(Nye and Owens, 2008; 5)

BP appears to have taken on a particularly important role in the process of creating the UK ETG and encouraging other fi rms to join. Senior representatives from BP headed both the UK ETG steering committee and the secretariat. Working papers from BP on their experiences with internal emission trading appear to have been infl uential in setting a direction, especially in the early days of the UK ETG (BP AMOCO, 1999; UK ETG, 1999).

(Nye and Owens, 2008; 5)

In a speech given soon after the release of the Marshall report, Rodney Chase, then chief executive of BP and arguably one of the more influential members of the UK ETG, outlined the position of BP on the subject of energy taxation. . . . in many instances, there are other economic instruments which offer greater benefits than taxation . . . BP is firmly of the view that emissions trading and voluntary agreements provide the most economic and the most effective route to reduce environmental industrial emissions. In contrast, energy taxes reduce greenhouse gas emissions only indirectly, i.e. by raising energy costs in the hope of reducing consumption (Chase,1999).

(Nye and Owens, 2008; 6)

It seems that the triumvirate at the core of the ETG had little trouble recruiting other members with similar views. The early business membership of the ETG was largely composed of energy sector interests (power companies and oil and gas producers) and fuel or energy intensive businesses in the manufacturing or transport sectors (UK ETG, 1999, 2000a, 2000b; see also Table 1).

(Nye and Owens, 2008; 6)

You ended up with maybe 30 or 40 companies and probably getting on for 70 or 80 people in the basement of the DTI – talking about, ‘what has Marshall left us with and what can we do about it?’. So I think there were two of those meetings maybe even three and that led to the idea of an emissions trading group (member of ETG secretariat).

(Nye and Owens, 2008; 7)

Moreover, the Treasury (which incidentally administered and published the Marshall report) was generally in favour of taxation, and was arguably better placed to influence policy direction and coverage through well established policy networks (Smith, 2002).

(Nye and Owens, 2008; 7)

In a symbolic sense, the emergence of governmental support for the CCL, in spite of industry’s previous advocacy of emission trading, presented a challenge to the role of business in formulating UK climate policy.8 Despite the high-level political access enjoyed by the UK ETG, it seems that the Treasury-dominated networks and mechanisms surrounding the creation and implementation of the CCL were less open to industry influence. This appears to have caused some resentment among the members of the ETG, particularly those who had been involved in this process for some time. According to one respondent who was both a founding member of the UK ETG and a key working group chairman, it was a desire to see these previous efforts come to some sort of policy fruition that initially drove business to persevere with the idea of emission trading, despite the diffi culties of working around the CCL:

(Nye and Owens, 2008; 9)

One of the most interesting findings from our research is that ETG members tended to characterize the threat of the CCL in more than just financial terms. As the following extract shows, the stringency of the government’s 20% domestic carbon emissions reductions target (see DEFRA, 2001a) seems to have signalled to many within the ETG that some form of extra legislation would be necessary in the future.

This had important consequences for the way in which industry understood the benefits of emission trading and the costs of the levy:

The levels of taxation to achieve anything like the government’s targets would be so stringent that no government would ever dare introduce them . . . it would go beyond political possibility. You have got to look at the people who were driving the UK ETG at that time. It was electricity generators and oil . . . And we knew that even if government did introduce a tax, sometime along the line they would introduce a cap on the energy industry. So therefore, if they were going to do that, we wanted the flexibility to be able to meet the cap with

(Nye and Owens, 2008; 10)

So, here are companies with big [CCL] exposures, UK based, recognizing that these issues had to be taken seriously – that carbon control is a big issue and it will become a bigger issue in the future.

And therefore that there was a political and an economic game to be played. . . . It needed to be dealt with, it was a long term issue, and what you needed to do is to begin to establish those institutions which would enable this issue to be addressed most effectively (member of ETG secretariat).

(Nye and Owens, 2008; 11)

…the analysis presented here suggests that the longer-term regulatory interests of a small number of powerful companies dominated the policy agenda surrounding UK emission trading, pushing through a relatively weak and complicated programme that had little to offer mainstream business.

Contrary to DEFRA’s optimistic early estimates (DEFRA, 2002), many businesses were reluctant to volunteer binding reduction targets, even in exchange for financial incentive payments. Those who did so tended be core ETG members, or those for whom recent changes in production or efficiency offered easy access to large volumes of incentive payments in exchange for ‘hot air’ (see NAO, 2004; ENDS, 2002).

(Nye and Owens, 2008; 11-12)

References

Confederation of British Industry (CBI). 2002. Green Taxes: Rhetoric and Reality.

ENDS Report. 2002. ‘Hot air’ blows gaping hole in Emissions Trading Scheme. ENDS 326: 25–29.

Environment Business LLC. 2003. Is the Market in the UK Emissions Trading Scheme Well Functioning and Who are the Key Players? EB: London.

National Audit Office (NAO). 2004. The UK Emissions Trading Scheme – a New Way to Combat Global Climate Change. NAO: London

UK Emissions Trading Group (UK ETG). 1999. Outline Proposals for a UK Emissions Trading Scheme, 1st edn. http://www.uketg. com [25 March 2005].

UK Emissions Trading Group (UK ETG). 2000. Outline Proposals for a UK Emissions Trading Scheme, 2nd edn. http://www.uketg.com

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Blog at WordPress.com.

Up ↑

%d bloggers like this: