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Sunday, January 27, 2013

European Carbon Trading Circling the Drain?

Der Speigel has reported on record low prices for carbon credits in the European Emissions Trading System (ETS). The Der Speigel article reports:
Indeed, the market for carbon credits has reached new lows. On Thursday, the price of carbon credits dropped 40 percent within 30 seconds before regaining most of the losses. In an indicator of just how vulnerable ETS threatens to become, the volatility followed a nearly meaningless vote for a non-binding recommendation by the industry committee of the European Parliament that the backloading plan be rejected.
... A failure on backloading would likely drop carbon credits to a level only slightly above penny stocks.
"This should be the final wake-up call," said EU Climate Commissioner Connie Hedegaard, according to wire reports. "Something has to be done urgently. I can therefore only appeal to the governments and the European Parliament to act responsibly."

On Thursday, the price hit a low of €2.81 ($3.75) per metric ton of carbon and rebounded back above €4 before the end of the day. But it remains far below the €20 or €30 price point that analysts say is needed to spur the type of clean investment needed by industry to cut carbon emissions.
Back in April of 2006, credits peaked at €32 and neared €30 per ton in 2008. When the ETS was developed, credits were supposed to be based on expected growth patterns, but no mechanism was built in to compensate for the possibility of economic fluctuations.
Although the article blames a large measure of the price decline on too many carbon credits being initially issued, the price is really a reflection that the dismal economy has reduced manufacturing and, with it, carbon emissions. Instead of celebrating reduced emissions, the European technocrats are worried. Why? Because many government pensions are heavily invested in the ETS.

This article from last April, when prices fell below €7 per ton, noted:
However, in one of the most significant interventions to date the Institutional Investors Group on Climate Change (IIGCC), a coalition representing around 80 investment firms and pension funds that combined boast €7.5tr in assets under management, yesterday issued an open letter to ministers calling on them to reform the ETS and force up the price of carbon.

The group – which includes Aviva Investors, the BBC Pension Trust, BNP Paribas, Co-operative Asset Management, HSBC Investments, and Scottish Widows Investment Partnership....
(Underline added).

Watts Up With That has covered the carbon trading scheme, including a recent guest article noting that the value of carbon trading "credits" rests solely on the dubious conclusion that there is a correlation between CO2 levels and global temperatures. This creates a conflict of interest for organizations, such as the BBC, which report on global warming and rely on global warming hysteria to fund their pensions. (See more discussion here, here and here). Faced with losing huge sums of money, expect the Greens to double down on the global warming scams.

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