Carbon fat cats are killing the emissions trading mouse

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http://www.guardian.co.uk/environment/damian-carrington-blog/2013/feb/14/carbon-emissions-carbon-tax?intcmp=122


Steel makers are among the companies making vast windfall profits from unused carbon pollution permits

What is the most important climate change policy issue in Europe right now? By a wide margin it is the broken emissions trading scheme, because it should the biggest and best way of cutting carbon emissions.

The idea of a cap-and-trade scheme is that the cap shrinks, requiring a progressive reduction in carbon emissions. Meanwhile the trade means that the cuts in emissions take place where they are cheapest, meaning the maximum benefit for the least cost.

That's the admirable theory. In practice, two factors have left the EU ETS in ruins, with a price - today about €4.50 - far below the €20 where it will even start to have an effect. The first is industrial-scale lobbying from the vested interests which has led to vast windfalls being handed to many companies in the energy-intensive sector (but not the energy sector itself). The second is the global recession, which has reduced the already-inflated demand that the companies projected.

The ETS has no mechanism to make sensible, automatic adjustments to compensate for unexpected falls - or rises - in demand. So a battle is now taking place in Brussels to try to patch up the ETS, by deferring the release of 900m permits, each for a tonne of carbon, for five or so years