So far, cap and trade hasn’t worked. Our research shows this is down to two key problems:
1) Left to government and industry to hash out the rules, far too many permits to pollute were handed out to begin with, allowing industry to continue with business-as-usual.
2) The global recession hit European industry hard. Now there’s an enormous glut of unused permits in the system, unused in the credit crunch.
The price of carbon crashed, and there’s no price incentive to use clean fuels or more efficient processes. In Sandbag’s paper, the 2020 Confidence Trick, we show how the Emissions Trading Scheme in Europe is now storing up an astonishing number of permits, a mountain of carbon emissions which will undermine all future targets.
Our 2013 assessment of the scheme shows how, out to 2020, the scheme acts to negate carbon emission reductions made in energy-efficiency and increases in renewable energy. The scheme is having effects its creators never dreamed of, holding back action on climate change in the EU.