NCPA - National Center for Policy Analysis


April 9, 2007

As U.S. lawmakers work on the details of "cap and trade" carbon dioxide legislation, they need to know what Europeans already know: When trying to slow down global warming, beware of unintended consequences, says Steven Mufson in the Washington Post.

Consider Kollo Holding's (a silicon carbide maker) factory in the Netherlands:

  • Managers at the factory say their plant as an ecological standout: They use waste gases to generate energy and have installed the latest pollution-control equipment.
  • But Europe's emissions program has driven electricity prices so high that the facility routinely shuts down for part of the day to save money on power, which, contrary to environmental goals, reduces energy efficiency.
  • Although demand for its products is strong, the plant has laid off 40 of its 130 employees and trimmed production.
  • Two customers have turned to cheaper imports from China, which is not covered by Europe's costly regulations.

They aren't the only ones suffering, says Mufson.  French cement workers fear they're going to lose jobs to Morocco, which doesn't have to meet the European guidelines; and German homeowners pay 25 percent more for electricity than they did before the caps.

Making matters worse, the rationing hasn't proved successful, says Mufson:

  • Because of lobbying by well-connected companies, the EU's limits on emissions ended up being higher than the actual emissions.
  • As a result, fewer companies than expected had to buy emissions this year, and the price of carbon allowances, which had topped $30 per ton of carbon about a year ago, crashed to about $1 a ton.
  • Germany boasts that it has cut emissions to 18.4 percent below 1990 levels, but nearly half the reduction was because of sagging industrial output in the former East Germany after reunification.
  • For the 2008-2012 period, European Union officials sliced 5 percent off Germany's emissions proposal.

Source: Steven Mufson, "Europe's Problems Color U.S. Plans to Curb Carbon Gases," Washington Post, April 9, 2007.

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