The European Union's flagship program to fight global warming—a regional carbon-emissions trading system—suffered a major blow Tuesday when legislators rejected a proposal aimed at saving the market from collapse.Scheme Flawed From the Start
After the European Parliament's rejection, spooked investors drove the already depressed price of carbon emission permits down by nearly half. Benchmark electricity prices also fell. Europe's Emissions Trading System, launched in 2008, was intended to protect the environment by raising the cost of polluting and encouraging businesses to invest in cleaner technologies.
Slack demand for electricity because of the recession and an abundance of permits helped push the price of emitting a ton of carbon below €5 ($6.60) earlier this year, from nearly €30 in 2008.
On Tuesday, the price dropped to €2.55 before recovering partially to €3.20.
Without some intervention to reduce supply, "the ETS will almost certainly collapse," said Kash Burchett, a London-based analyst at consulting company IHS Energy.
"Prices will likely sink below €1 per ton as participants recognize that there is no political will at present to restore the market mechanism to functioning order," he said.
"Today's vote is a historic failure," said Joris den Blanken, EU climate policy director at environmental advocacy group Greenpeace.
Really? No not really.
Today's vote is one of the few common sense things the EU has done in years. Giving existing polluters credits that they could sell, and credits that new polluters had to buy, is preposterous.
Hopefully this will bury the idea forever, but don't count on it. Please note that I am not praising pollution. I am against this method of doing something about it.
I also disagree with the entire concept of man-made "global warming" in the first place. Even if it exists, the odds that government will do something reasonable about it is close to zero.
For further discussion of EU clean energy silliness, please see Paul Krugman "Was" Right.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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