FIASCO? Meltdown? Not quite. OK, so the new European Union’s emissions trading system got off to a shaky start. The EU released figures this week showing that governments requested permits to release far more greenhouse gas than their industries actually emit. The market in these permits slumped as a result. This is hardly good news, but it need be nothing more than teething trouble.
First, the present trading round is just a pilot phase. The real business starts in 2008, when the Kyoto protocol’s legally binding national targets on greenhouse gases take force. Second, whatever the prices, the market is booming. Last year, it was worth more than the entire US wheat harvest. The whole point of the market in permits is to let polluters make money out of cutting emissions. They are unlikely to let that opportunity pass.
Certainly, many governments have been duped into issuing too many permits, but this week’s emission figures tell us exactly how much individual companies pollute, so next time there will be no excuse for mistakes. That’s important because failure then would scupper Europe’s chances of meeting its Kyoto obligations and of taking the lead in negotiations for what happens post-Kyoto.
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Some have argued that last week’s price crash was a victory for big energy companies. Look closer and you discover that the share prices of many of them dipped at the same time, because their pollution permits lost value. For scientists and environmentalists, the workings of the market can appear strange and contradictory. We are, in truth, now riding two unpredictable tigers: the climate system and the markets. So what’s new?
