Kristine Lofgren

Europe's Carbon Market Failures Expose Flaws in the Cap and Trade System

by , 04/23/13
filed under: global warming, News, Policy

EU Cap and Trade, EU carbon allowances, EU carbon market, European cap and trade, European carbon allowances, European carbon market, cap and trade problems, carbon market dropping, carbon market failure, global warming solutions, market solutions for warming

There once was a time when cap and trade plans looked like our best hope for limiting carbon emissions. But recent fluctuations in the European carbon market seem to indicate trouble in paradise. The prices of carbon allowances — necessary for any company that plans to produce more emissions than allotted — have dropped down to 10% of what they were once worth. While that’s bad news for investors, it also gives polluters a cheap way to continue polluting as usual.

EU Cap and Trade, EU carbon allowances, EU carbon market, European cap and trade, European carbon allowances, European carbon market, cap and trade problems, carbon market dropping, carbon market failure, global warming solutions, market solutions for warming

Last week, the price of carbon allowances settled at $3.90 after an all-time high of $40 just a few years ago and an all-time low of nearly zero. Ever since that high, the price has consistently crawled lower and lower, hovering in the single digits for at least a year.

For those who make money off of the market of trading carbon allowances, it has made for a difficult year. But the bigger problem is that the cost of buying allowances is so low that they are cheap for any company that wants to continue polluting, defeating the purpose of the system. When the price of carbon allowances was high, companies scrambled to invest in renewable energy like wind and solar. That is no longer the case now that prices are low.

The system works by placing a cap on how many emissions a company can produce. Allowances can be purchased through a national auction system, which gives the company the ability to produce more emissions. Over time, the number of available credits would be reduced, thereby reducing emissions. The problem is that there are far too many credits available on the market right now, and the EU has refused to address the problem. For now, the cap and trade system’s problems indicate that a solution without strict government oversight isn’t really much of a solution at all.

Via The New York Times

Images by Derek Chan and Nagyman

Related Posts

LEAVE A COMMENT

or your inhabitat account below

Let's make sure you're a real person:


  • Read Inhabitat

  • Search Categories

  • Recent Posts

  • Recent Comments

  • Browse by Keyword

get the free Inhabitat newsletter

Submit this form
popular today
all time
most commented
more popular stories >
more popular stories >
more popular stories >