Thursday, 22 January 2009

Unintended Consequences Again

The EU thinks that it needs to save the planet from excessive CO2 emissions so it has introduced a carbon trading scheme. The idea is that permits are handed out to industry to allow them to produce CO2. If you need more permits then you have to buy them off somebody else who doesn't need all their permits. Thus a fixed amount of CO2 is discharged into the atmosphere.
Each year the number of permits is reduced which has the twin effect of reducing the total amount of CO2 emitted and forcing up the price of the permits. The latter effect is designed to encourage recalcitrant industries to reduce their CO2 output.
The only problem is that this whole scheme is based on a growing economy. Now, you may have noticed that European economies are not growing. In fact production by industry has declined so much that the output of CO2 will be below the amount this years permits allow. Thus companies are selling off excess permits to make a few bob and, in doing so, they are depressing the price of the permits.
It doesn't encourage one to feel good about the EU does it?
(H/T EU Referendum)

No comments: