Friday, 4 February 2011

The Shambles of the European Carbon Trading Market

Pressure is growing at international climate change conventions for the carbon trading markets to go global, but recent events in Europe, the world’s most developed carbon trading market, illustrate only too graphically the challenges any such move would face.

In a recent Telegraph article, coverage highlights two disturbing issues in the European market that should make other regions pause for thought before embracing the idea. Firstly let us say that in principle, if we accept that carbon emissions should be reduced, then we are in favor of the concept of carbon credits as a means of encouraging polluters to reduce those emissions. A free market in carbon credits is better than government taxation because it allows companies to respond to what is best for their organization rather than all firms being forced to react in the same way; however, the experience in Europe has totally undermined the concept and the reality is that the same forces that have undermined the European market would have a major impact on adoption in other regions.

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