Permits to pollute can be bought too cheaply
When the carbon price collapsed to below €3 in April this year, EU policymakers sought to prop up carbon prices by a deal that would delay the release of carbon allowances (known as “backloading”). This deal was agreed by the European Parliament in July, but has had little impact – prices still languish at around €4-5, well below the highs of €30, the sort of level economists consider necessary to bring emissions under control. Is this a disaster? Does it mean the death of the carbon markets, as many have suggested?