The EU's Emissions Trading System Isn't Working

[xchrom]

http://www.spiegel.de/international/business/0,1518,815225,00.html



In the perfect world of economic liberals, every commodity has its price. Limited supply makes goods more expensive and vice versa. That's how markets work -- at least in theory.

In practice, things often look different, and this is especially true when it comes to emissions trading, a business subject to a very different mechanism: laws dictated by the European Union.

Economists have generally praised the trading scheme as a nearly ideal instrument for reducing harmful carbon dioxide emissions. In this system, businesses purchase pollution permits, with prices determined according to supply and demand, in an efficient and self-regulating process. Companies that invest in environmentally friendly technology need to buy fewer certificates, or may even have some left over to sell.

But for the last half year, prices for CO2 certificates have dropped almost continuously, decreasing by about half, to around €8 ($10.60) per metric ton. Not even the closure of eight German nuclear power plants in 2011, and the resulting increase in demand for coal power, has done much to lastingly reverse the trend.

[Ron Green]

1. It's laughable to think the Free Market will

somehow do the right thing. The market will always do not the right thing, but the profitable thing.

[txlibdem]

2. truth

[Massacure]

3. I wouldn't say it's not working...

One tonne of coal will generate 2.85 tonnes of CO2 (more or less, depending on the carbon content of the coal). So you are essentially adding $30 on to the price of a tonne of coal.

As the amount of credits available starts to shrink, companies will be forced to buy more credits.