The European Parliament just voted to fix its mess of a carbon market. The Emissions Trading System, or ETS, was launched in 2005 to curb the bloc’s emissions. Not wanting to hamstring its industries, the EU made sure the price for emitting would start out low by overallocating the supply of carbon permits at the outset. Now, eight years later, the price of carbon is a scant €4.90, a far cry from its €30 high back in 2008. Firms have little incentive to adjust behaviors with a price that low, which has prompted Brussels’ best and brightest to move forward with a plan to “backload” further allocations of permits—temporarily curtailing the supply of new permits by roughly one third—to help drive the price back up. The NYT reports:
Current trading prices are not considered sufficient to give companies much incentive to invest in clean technologies or reduce their use of coal, which emits more carbon dioxide than other fossil fuels like natural gas. “Below €20 has no impact on investment decisions,” said Roland Vetter, an analyst at CF Partners, a commodities trading house in London.
But a higher price of carbon isn’t necessarily in the continent’s best interest. European businesses are already struggling to compete internationally, saddled with the yoke of high electricity prices (a result of green energy subsidies run amok). To slap these industries with more costs—costs that aren’t borne by firms outside of Europe—will make the grass appear that much greener abroad.