The price of European carbon emission certificates has plummeted in the aftermath of the global economic crisis. This week the European Parliament narrowly voted down a bill designed to prop up the price per ton of carbon emissions in an attempt to keep the once-lauded program financially viable.
Cap-and-Trade has always seemed a jury rigged method of dealing with the principal driver of global climate change. A straightforward carbon tax would be a more transparent external cost but the political challenges of instituting such a tax have largely kept it off the table. The political difficulties have been compounded by the challenge of implementing carbon taxes globally – which country wants to walk into the propeller first? Cap-and-Trade at least had the virtue of being fungible; emissions banked in one country could be spewed out in another corner of the world.
Climate policy expert Felix Matthes, of the Institute for Applied Ecology, sat down to talk with Spiegel Magazine about the stark implications of Parliament’s decision, which he sees as the death knell for EU-wide emissions reduction. The ironic result, he says, will be a return to a national, rather than regional, approach to carbon reduction with serious consequences for global efforts to reign in emissions. Noting that while right wing politicians hope to undermine climate change policy entirely, and those on the left seek more regulatory protection, he still believes carbon trading is the most fruitful means of dealing with the global reach of carbon emissions. Unfortunately, the dramatically reduced energy consumption and industrial output following the economic crisis, combined with a glut of credits from China, have resulted in a flood of certificates on the market and a corresponding precipitous decline in their price.