EU Carbon Permits Cheaper Than A Cup of Starbuck’s Cappuccino!

Posted on May 9, 2013 by Stephen Herrmann

The world’s biggest carbon permit market was left in disarray after the European Parliament on April 16, 2013 rejected an emergency plan that would have forced companies to pay more for polluting.

Permits are a key part of the EU Bloc’s cap-and-trade plan to tackle global warming.  The European Parliament rejected a proposal to reduce the short-term supply of carbon permits as a way of pushing up the price.  At the launch of permits in 2005, the cost of a permit was nearly €30 for each ton of carbon emitted.  Following the vote on April 16, 2013, the price plummeted to a little over €2.5 a ton.

Making matters worse, following the vote, the European Parliament’s Environment Committee coordinators failed to set a date for a vote on an amended version.

Not only is the collapse of the cornerstone of its climate policy an embarrassment to the EU, but its failure resonates in other areas of the world.  Australia has fixed a carbon price of $23 a ton until moving to a floating market price following the EU model in 2015.  But, that is being reconsidered.  The EU situation, coupled with the U. S. Senate’s rejection on March 22, 2013 of a bill to impose a fee on carbon, means that the Obama Administration will have an uphill battle for any future proposals for a fee or tax on carbon emissions.