Life is Now Cheaper for Polluters!
While the world was distracted by crashing banks and US elections, there has been a small environmental earthquake. The Price of Carbon Has Collapsed
In only three months, life has become a lot cheaper for polluters. This has severely impacted on Europe’s emissions trading system (ETS) and cast doubts on the effectiveness of these schemes.
The ETS has been set up to encourage businesses to reduce their carbon output. Europe’s larger companies are allocated permits to emit CO2, and these allowances, can be traded on exchanges. Companies that emit less CO2 than their allocation can sell the allocation for cash, but inefficient polluters must buy excess allocation or be fined.
The idea is that a shortfall in allocation causes the carbon price to rise, stimulating investment in carbon reduction. Unfortunately the carbon market is showing a distressing tendency to behave like most financial markets — hysterically. In July, the right to spew out one tonne of Carbon dioxide from a chimney would have cost a power generator E29.33, but yesterday it could be bought for only E18.25.
The sudden collapse of the carbon price mirrors the rout in the wider commodity markets.
Technorati Tags: Carbon, Carbon dioxideCarbon price, Carbon trading, Emissions trading scheme
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