International Carbon Exchange Markets. A Long Way to Go.

I’m on my flight back from Washington D.C., where I spent the last two days visiting with the White House and with members of Congress.

The reason for my visit was to discuss the potential for an international carbon exchange market.

It’s a hotly contested issue (so to speak) that has generated a great deal of controversy in the U.S.

The concept of an international carbon exchange market can be explained as a system that requires each industrial emitter to obtain a permit for each ton of CO2 emissions.

Because these permits trade at a market price, companies have an incentive to reduce their emissions, thereby requiring them to buy fewer permits or enabling them to sell excess permits for a profit.

At least that’s the idea.

I say that because,  as economist Jeffrey Sachs points out, the inter the permits’ market price has plummeted in the midst of Europe’s economic slowdown.

Permits that used to sell for more than $30 per ton before the crisis now trade for under $10. At this low price, companies have little incentive to cut back on their CO2 emissions – and little faith that a market-based incentive will return.

As a result, much of European industry continues on a business-as-usual energy path, even as Europe tries to lead the world in this transformation.

Change.  It’s not easy.

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