There is little doubt Europe’s “cap-and-trade” system has been a failure. In 2012, fewer European companies acknowledged the price of carbon as “directly related” to future investment decisions than reported in 2007. Meanwhile, emitters have benefited immensely from the collapse of carbon prices and politicians look the other way, having convinced the public of taking action. Ironically, given the failure of “cap-and-trade” systems from Kyoto to the EU ETS, countries seem eager to implement their own trading systems. Unfortunately, without specifically addressing the undue political power of polluters and financiers, it is likely that any system designed to reduce emissions will be hobbled by the influence of dirty players and offer little more than Potemkin solutions. A “cap-and-trade” system appears the least attractive solution as it’s inherently based on the speculation of expected emissions to determine permit allocations and therefore more susceptible to industry collusion. In addition, the creation of carbon as a “financial instrument” and its price determined by a lassie faire carbon market open to fraud and abuse underscores the inanity of searching for a “market solution” to an environmental problem.
