If you need more evidence that cap-and-trade isn’t really market-based, you need look no further than the latest collapse of the EU carbon market.
As reported by Restructuring Today,
Prices in the European Union’s (EU) emissions trading system plunged to the lowest levels since a recession-led sell off in March 2009, as European infighting over climate change goals drains the market of demand. The price hit single digits this week as the sell-off continued from last week, said ICIS Heren data.
The reason was that the EU is planning to impose new energy efficiency legislation on the same sectors that are included in the emissions trading system. This will lower emissions from these sectors and mean that they will not have to buy as many allowances as previously thought. Some countries such as Poland, blocked moves to restrict the supply of emissions allowances and toughen up the EU’s existing carbon reduction target.
The news came at the same time as international pressure is mounting on the EU to let some airlines escape the emissions trading system instead of being included next year as planned. This would remove even more expected demand for allowances.
It’s tough to have a market with constant fear of arbitrary government action.
Also note that California just delayed its cap-and-trade program for a year over concerns of market manipulation.
We predict this delay will extend past the 2012 election so as remove its costs and/or failure as a campaign issue.