Monday, April 22, 2013

More on Carbon Trading Failures

Today's NYT has an article on the collapsing market for carbon allowances. Since it's become close to free again to release carbon into the environment, people are doing so: Britain used 30% more coal last year.

Carbon markets put a price on emissions, but like any market they are somewhat artificial, including some costs and excluding others. In this case, too much provision was made for things like continuing steel production (not happening) and for coal burning in Poland (which was needed to get them on board, but which has driven the price down precipitously).

The market can still work if the supply is tightened, but the prospect of tightening supply is not an appealing one in tough economic times. We'll see if the time for the idea comes soon, or if it has come and gone.

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