Shell has launched an impassioned defence of emissions cap-and-trade schemes, arguing that despite the falling price of carbon within the EU's scheme and growing calls for alternative carbon management mechanisms such as carbon taxes, cap-and-trade schemes remain the most effective way of cutting emissions. Speaking at a roundtable event at the company's UK headquarters, senior executives insisted that the EU emissions trading scheme (ETS) was working, had already driven investments in low carbon technologies and offered the most efficient and flexible means of cutting emissions.
Despite being at the core of President Obama's climate change strategy, cap-and-trade schemes have faced criticism in recent weeks after the price of credits in the EU ETS scheme fell to a record low of EUR 8 (GBP 7), prompting some market watchers to predict that fluctuations in the price of carbon would make it harder for firms to justify investments in low carbon technologies.
Their concerns were echoed by oil giant ExxonMobil, which last month argued that it would rather see a US carbon tax than a cap-and-trade scheme as it would give the company certainty over precisely how much carbon will cost in the future.
In a shift in the company's previously tough stance on climate change legislation, Exxon's chief executive Rex Tillerson, said that while 'it is hard to speak favourably about any new tax', a carbon tax represents 'a more direct, a more transparent and a more effective approach' than cap-and-trade mechanisms.
But speaking earlier today, James Smith, chairman of Shell UK, dismissed the case for a carbon tax, arguing that unlike cap-and-trade schemes there would be no guarantee that environmental objectives would be met.
'The cap in a cap-and-schemes trade ensures that the environmental objective is met – it works and it is already proven that it works,' he said, adding that any government setting a carbon tax would face the difficult challenge of setting the right price. 'Set it too low and you won't meet the environmental objectives, too high and you cut off economic activity,' he warned.
Smith's comments were echoed by David Hone, group climate change advisor at Shell, who argued that the recent drop in the price of EU carbon allowances (EUAs) was not an indication that the scheme was failing.
He said that even if a continuing drop in industrial output pushes......
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