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David Brancaccio: One thing Europe does not need is another quote “sickly” market. This time, it’s the market for carbon credits. Prices have collapsed for the right to spew carbon dioxide into the environment. And today at a big European Union energy conference in Brussels, some policy makers are working to change that.
From the Marketplace Sustainability Desk, Scott Tong reports.
Scott Tong: If you’ve always wanted to cross the pond and spew a ton of carbon into the air, act now. Costs just $9, half the price of a year ago. Of course it’s free in the States, where we don’t regulate the stuff, but that’s another story.
Economist Robert Stavins at Harvard says Europe’s carbon market is sagging, because its economy is. Less buying, less selling.
Robert Stavins: The result of that is lower industrial production, hence less generation of electricity – particularly by coal-fired power plants – and hence lower emissions.
Europeans have stayed under their emissions caps, and few companies need to buy allowances to emit more. So allowance prices have dropped. But even though Europeans have fit into the skinny jeans they designed years ago, some want to go skinnier. At EU talks today, some countries want to shrink the supply of carbon allowances, so prices will rise.
Denny Ellerman at the European University Institute in Florence, says these people want a faster energy revolution.
Denny Ellerman: From that perspective, they would say the price is not high enough to yield the results we expected with respect to energy transformation. And therefore, we believe the price should be higher.
But are low prices inherently bad?
Stavins: The hand-wringing in Europe is somewhat misplaced.
Robert Stavins says the market’s working as intended.
Stavins: When there is a recession, then rather than continuing to punish private industry unnecessarily, when emissions are low anyway, it loosens the constraint.
And if you wonder if low prices doom carbon markets, not in this case. Europeans have agreed to extend their market past 2020. And more are coming: in Australia, New Zealand, Canada, China, California.
Marcus Ferdinand is with Point Carbon in Oslo.
Marcus Ferdinand: Higher volumes in the market and expectations of an even growing market gives you a certain security this market will not be vanished from one day or another.
Think of carbon markets as a teenager: immature, volatile, and in the end, presumably they grow up.
In Washington, I’m Scott Tong for Marketplace.
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