EU's pollution control measures suffers setback

EU's carbon market slumps

 
Published: Friday 30 June 2006

Will trading help? (Credit: Greenpeace)european plans to cut pollution have seen a set back following a massive slump in markets, caused by the "cack-handed" way in which carbon emissions trading was set up within the continent, say energy experts.

The European Commission (ec) has found that in 2005 alone eu industrial units pumped out 1.785 billion tonnes of carbon dioxide, while national authorities had given them allowances for 1.829 billion tonnes -- this was about 2.5 per cent surplus. "When it emerged that the number of permits exceeded demand, prices slumped by 60 per cent. In this situation the allowances are potentially worth nothing; but ec will be much stricter about its assessment of the national allocation plans in the future," says Louis Redshaw, head of environmental markets at Barclays Capital.

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Experts had actually sounded an alarm after ec found that states had issued too many carbon polluting permits to companies under eu's Emissions Trading Scheme (ets) -- a mechanism to reduce carbon dioxide emissions to meet Kyoto Protocol targets. The permits effectively make the "right to pollute" a trade commodity, giving companies the ability to buy and sell permission to emit extra carbon dioxide. According to experts, these market mechanisms are the best way forward; but only if they are designed to reduce carbon dioxide emissions rather than allowing people to profit from selling the quotas they have not used. Because, the excess quotas show that the purpose of the carbon-trading scheme has been defeated.

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