Just as President Barack Obama is trying to persuade Americans that a cap and trade
system is the way to curb carbon emissions, the world’s flagship
program in Europe is in danger of failing. The price of carbon traded in
Europe has collapsed to around 5 euros per metric ton compared with 30
euros a few years ago...
The EU Emissions Trading System
is intended to set a price on greenhouse gas emissions in order to
force polluters like steel mills and power stations to clean up their
acts. In the European union, factories and other installations ... must either acquire
or be allocated permits each year equivalent to the amount they emit.
For instance, Luxembourg-based ArcelorMittal, the world’s largest
steelmaker, was allocated about 87 million tons in permits last year.
The number of permits available each year is supposed to gradually
decrease, squeezing emissions down. ... But
the system has actually been very permissive — even a money maker for
them. Largely because of the recession, the number of permits allocated
has turned out to be far too great. Companies have cut back production
because of lower demand and have ended up with surplus permits, which
they have been selling. That has been one of the key reasons why prices
of the permits, which are traded on exchanges just like oil and other
commodities, have dropped so much.
The current low price undercuts the purpose of the trading program —
which was to encourage companies to invest in energy efficient
technologies. Single-digit prices don’t encourage companies to do
anything, analysts say. A much higher price is needed to force change —
say 30 or 40 euros per ton or even higher.
All of this raises questions about whether a cap and trade program
like the European Union’s is the best way to reduce emissions. Advocates
say that the simplest way to cut greenhouse gases is to set a high
carbon price and then let polluters make decisions about how to do it.
That way governments are not picking technologies that may or may not
work. But as Europe’s experience has shown, getting carbon pricing right
is not easy.
By STANLEY REED
FOR FULL STORY GO TO:
The New York Times www.NYTimes.com
February 20, 2013
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