Cap-and-trade still has kinks

Sarah Gardner Dec 11, 2007


Doug Krizner: Delegates to the U.N. Climate Conference in Bali are outlining a plan to succeed the Kyoto Protocol. It expires in 2012. Kyoto inspired a European cap-and-trade scheme launched two years ago. Levels of allowable greenhouse gases were capped, and industries were issued credits which they could buy and sell. But as Sarah Gardner reports from the Marketplace Sustainability Desk, the success of that system is in doubt.

Sarah Gardner: Critics say Europe’s greenhouse gas emissions are still rising, despite the cap-and-trade scheme. They say the E.U.’s biggest blunder was issuing too many emissions credits. That made the permits cheap, and gave companies no incentive to clean up their acts.

Hugh Robinson at the London-based think tank Open Europe says the E.U. also goofed when it handed over 90 percent of the pollution permits for free instead of auctioning them off.

Hugh Robinson: And it’s effectively a subsidy to some of Europe’s worst polluters.

Yale University’s Daniel Esty says yes, Europe is still working out the kinks in its carbon-trading system, but it’s too early to call it a failure.

Daniel Esty: Companies are paying attention and are investing in a variety of ways to reduce their emissions, driving resources into new technologies.

Esty says Europe’s mistakes are a lesson for U.S. legislators crafting their own cap-and-trade scheme.

I’m Sarah Gardner for Marketplace.

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