After a failed attempt in April, the European Parliament succeeded in passing a measure early in July to address the low price of the EU’s emissions trading system. Emissions prices in the $72 billion cap-and-trade program had lost more than 70 percent in the past four years. The low price of Europe’s carbon market is attributable to the prolonged recession of 2008 and the glut of permits that cut the price to as low as about 2.75 euros a ton.
Europe’s carbon markets are essential to the continent’s strategy to reduce GHGs and combat climate change. Cap-and-trade systems gradually make polluting more expensive thereby using market forces to drive the adoption of greener technologies and the reduction in carbon emissions.
Some of those who voted no in April changed their minds due to an amendment ensuring that the intervention was a one time deal and by a planned study of the dangers of businesses leaving the EU to avoid the higher permit price.
The final vote was close at 344 to 311 (with 46 abstentions). The news had a positive impact on the value of carbon credits, rising 9 percent (4.70 euros, or $6.13, per ton).
Prices are being buoyed by delaying the auctioning of some carbon allowances. The measure passed despite the concerns of Poland, the Czech Republic and others. These nations are worried about the schemes impact on coal fired energy and other industries. Others did not want to see interference in the market system. At the end most realized that something had to be done to “stop the bleeding” as Connie Hedegaard, the European Union’s commissioner for climate action put it.
Hurdles remain if the cap-and-trade scheme is to move forward, this includes the positions of national governments like Germany which will be voting in elections on September 22. Peter Liese, a German Christian Democrat member of the Parliament, said,“It’ll go very fast after the German elections.”
In the longer term we will also need to see higher carbon credit prices if the program is to be effective. However, the EU’s action in July is a good start towards renewing the continent’s emissions trading scheme.
As a model emulated around the world, the success of the EU’s carbon trading system is crucial.
© 2013, Richard Matthews. All rights reserved.
World Bank President Advocates Putting a Price on Carbon
Carbon Pricing and Emissions Trading a Global Review
RGGI is Increasing Renewables while Reducing GHGs and Spurring Economic Growth
The Success of RGGI Carbon Trading Shows Cap-and-Trade Works
Video – What are the benefits of a carbon price?
Video – How does carbon pricing work?
Video – A Price on Carbon in 5 Easy Steps
Video – The Cost of Carbon
Climate Change Caucus in Washington Breeds Hope for Legislation on Emissions Reduction Perhaps Even Cap and Trade
California’s Cap-and-Trade Leadership
California is Leading the US with a Cap-and-Trade
South Korea Passes Cap-and-Trade Legislation
US Cap-and-Trade Implications for Business
US Cap-and-Trade: What and Why
Small Business Can Save US Cap-and-Trade
US Cap-and-Trade: Obstacles and Solutions
Cap-and-Trade Legislation Faces Opposition
Helping Small Business Accept US Cap-and-Trade
The Kochs’ Americans for Prosperity Actively Undermines Cap-and-Trade