PER 2015
However, that’s not to say it’s been as successful as many of its advocates believed. And there have been several hiccups along the way.
The Hiccups
The main problem is that the ETS simply dished out way too many bloody permits. According to the scheme’s watchdog SANDBAG, each company had 7% more pollution permits than they actually needed. With so many permits flooding the market, the price per tonne of carbon
dropped to near €2, making the permits worthless and the incentive to invest in efficient technology negligible because not much money could be made by selling your spare permits. Therefore the first phase of Europe’s flagship environmental policy didn’t go that well.
The reason why too many permits were given out was partially the fault of the 2008 recession. As demand collapsed firms cut down on production. The plus side was that world CO2 emissions temporarily fell. The down side was that the market was overwhelmed with permits. The other issue is that more and more intensive manufacturing is being sent to China. Therefore demand for carbon permits in Europe has been dropping. However whether greenhouse gases are emitted in China or Europe they are still causing climate change. The answer came from the American State of California’s mega economy. All by itself it is the world’s eighth largest and produces 1% of global carbon emissions. In 2008 California set up AB32 environmental legislation which included a cap and trade scheme, however part of the permits were sold by auction. This means companies would only buy as many permits as they really needed and the government can make some money by the sale. The risks were huge, Americans are especially sceptical of
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