To Control Energy Price Inflation, Shut Down the ETS!

The year 2022 opens under the full impact of the hyperinflation of energy prices. As natural gas prices have increased sixfold on the future markets, authorities in many member states of the European Union have already allowed consumer price increases of over 50% for electricity. But growing energy costs have started to drive consumer prices up across the board, and the official inflation figures in the transatlantic region, while alarming, are only the tip of the iceberg.

We at the SAS have systematically warned of the hyperinflationary explosion that would occur as a result of the central bank monetary policy of continually inflating asset prices, as if this would not spill over, one day, into the real economy. Mainstream economists claimed that “a bit of inflation” is good to boost the economy, but history teaches that once out, inflation cannot be controlled.

Now, in this situation, with traders in search of gains in commodities, Western economies – Europe in particular – decided to create an artificial scarcity on those markets by levying climate taxes. The so-called Carbon Tax in the European Union is levied through the Emission Trading System, which sets a cap every year on carbon emissions for the Union. Under the European Green Deal, the ETS cap is lowered each year, automatically increasing CO2 prices. Furthermore, the ETS has become a real speculative market, with financial players trading derivatives on CO2 allowances.

For this reason, Poland and the Czech Republic have demanded that the ETS be shut down, but strong resistance has come from other member states. A study commissioned from the Potsdam Institute on the Effects of Climate Change (PIK) came to the conclusion that a mechanism should be introduced to distinguish between “good” speculation (hedging) and bad speculation. The institute proposes that the ostensible “balance” between market forces and hedging be monitored and controlled by a new agency operating on the EU level.

However, previous hedging practices on the markets show that they did not tame speculation anywhere; instead, hedging has grown with the speculative bubble.

Therefore, the hyperinflation that is now visible in energy prices will hit consumer prices of all items, because 1. Energy prices will stay high throughout the winter; 2. Central banks will continue to provide speculators with the necessary liquidity; and 3. In the mid-term, the EU plans to increase carbon taxes with the expansion of the ETS to other sectors, and to introduce a so-called Border Adjustment Tax on so-called “CO2-dirty” products from third countries.

To stop this artificial energy crisis immediately, several measures should be taken: Shut down the ETS system; Reverse the CO2-punitive energy policy; Allow immediate use of the Nord Stream 2 pipeline, already now filled with Russian gas for Europe; 4. abandon the British system of spot and future energy market and return to long-term state-to-state contracts.

While this will cool down the situation on the energy market, it won’t defuse the hyperinflationary potential of the financial bubble. This must be tackled with Lyndon LaRouche’s “Four Laws”, starting with pulling the rug from under speculation by separating commercial (chartered) banks from investment banks.