Emissions Trading Schemes Threatened
March 6th, 2009
While the Govt desperately tries to find an emissions trading formula to suit everyone, the issue could be moot anyway – the price of carbon has lost almost two-thirds of its value in the past six months, threatening future investments in the energy sector and undermining confidence in emissions trading across the globe. An EU permit to emit one tonne of CO2 cost €10.15 at the end of last week, down from €28.50 in mid-2008 and a far cry from forecasts of up to €40.
All of this spells worrying news. The most bearish experts are now predicting the price could fall to €9 as global recession, reduced manufacturing output, and the resulting reduction in consumption of fossil fuels, feeds through to reduce the need for carbon emissions permits.
There are now questions about whether Govt policies might change as the economic climate worsens. There is a confidence issue around whether Govts will keep their nerve as recession bites. The plan was to keep tightening the carbon market to push the price up and encourage low-carbon investment. The question now is whether Govts back away from this, and seek to ameliorate the effect of the recession on hard-hit industries by keeping the carbon price low.
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