Wednesday, January 28, 2009

A second carbon windfall

An Australian look at the European confection with a lesson for American policy:
Cap and 100% rebate of proceeds.

From the Business Spectator:
The European carbon market – the largest in the world by some considerable margin – is having its second price meltdown in three years as European industries find themselves once again with more carbon credits than they need.

The cause this time is not just blatant over-allocation – as it was in 2006 – but the biting effects of the economic downturn, which is reducing manufacturing output by up to 14-15 per cent in some areas.

This is having the perverse effect of delivering yet another windfall to those parts of European industry that receive free permits.

According to market analysts, these industries have been selling excess credits at the rate of some €150 million per week over the last two months. Some in the EU might like to think the companies are reinvesting these windfalls into clean energy or energy efficiency projects, but that seems unlikely in the current market....MORE