In Canada, the British Columbia New Democratic Party is promising to cancel carbon taxes and implement carbon trading, if it wins the provincial election. In the U.S., the Obama administarion is pushing hard for a similar system, as is the Rudd government in Australia. But carbon trading cannot do the job …
By Andrew Simms
New Scientist, April 20, 2009
Andrew Simms is author of Ecological Debt: Global warming and the wealth of nations (Pluto Press), and policy director and head of the climate change programme at the New Economics Foundation
One day renewable energy looks like a sunrise industry, the next, tumbleweeds are blowing around a setting solar panel. What has changed? The price of emitting carbon dioxide.
In 2005 the European Union created the world’s first proper carbon market, the EU Emissions Trading Scheme (ETS), which compels highly polluting industries to buy permits to emit CO2. The number of permits is limited, so the idea is that supply and demand set a price that encourages the development of a low-carbon economy. A rising price with no wild fluctuations sends an economic signal to invest in clean energy. But it’s not working.
The price of a tonne of CO2 on the ETS has had a roller-coaster ride – soaring one minute, plummeting the next. In the past year it has lurched from over €30 to €8, and now languishes at around €10. Disastrously, such low and unpredictable prices for CO2 remove the economic incentive to decarbonise economies.