With the dramatic fall in prices of carbon emission permits this week, the Financial Times responded today with an editorial (2006-04-29). Here is an excerpt:

“This is a tricky time for the trading system because governments are, for the first time, reporting their actual level of emissions. What put the carbon price into temporary free fall was the news that Spain had generated less pollution in 2005 than the market had expected, though still in excess of its allocated permits for that year. At the same time, four countries - France, the Netherlands, Estonia and the Czech Republic - also reported carbon pollution last year that fell short of their national permit levels. But it would be premature to trumpet this as good news. For there is a strong suspicion that EU governments, of which at least 15 are on track to exceed their eventual Kyoto targets, are being too generous in awarding permits to their industries rather than the latter being unexpectedly successful in cutting pollution.

However, while the figures for actual pollution last year have posed a problem for the carbon trading system this week, they will, as they become available for the whole EU next month, give Europe a chance to rebase its system on reality. It may be too late to rein in the level of permits that have already been set for this year and next. But it is not too late to tighten the system for 2008-12, the period when Kyoto enters into force and widens the trading system to include other Kyoto signatories such as Japan, Canada and Russia. For the EU is negotiating its permit allocations for this later period now.”

The FT news articles on the fall in prices was here (2006-04-28).

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This entry was posted on April 29th, 2006 at 18:17 (GMT) and is filed under Carbon Prices, Forecasting & Modelling, Policy . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.