The right way to judge a carbon market (hint: it's not the prices)

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If you’re judging the success or validity of a carbon market like the European Union’s Emissions Trading System (ETS), the price at which carbon trades is a bit of a red herring.  In an editorial published in the Financial Times on Tuesday, Environmental Defense Fund senior economist Gernot Wagner and vice president for international climate Nathaniel Keohane argued that the focus on prices in the EU ETS – and more generally – is misplaced. 

“The key test of a carbon market is the emissions reductions it achieves,” Keohane told me. “Of course, the carbon price plays a critical role in determining the incentives for reducing emissions and investing in cleaner technologies.  But in a cap-and-trade system, the carbon price is ultimately a means to the end of reducing emissions.” 

If a low price tells us anything, Keohane suggested, it’s that there is room to tighten the cap. The goal, after all, is to make emissions scarce, not necessarily more expensive. See the full editorial on the Financial Times site for more (free registration required to read the article). 

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Dan Upham

Dan Upham

Dan is a writer and editor at EDF.

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Comments

the key test of a carbon market is the emissions reductions it achieves, i think it's correct

Energy markets and carbon taxes are just another way of privileging the rich...

genius

Just one action has to be taken or anyong under 35 may see the future gone. WE HAVE TO MAKE THE SUN OUR SOLE ENERGY SOURCE TO GET CLEAN ENERGY. THAT will set the future free of of mounting pollution and CC/GW that otherwise will bury or burn away the future by 2050. This can be done as new reseach is getting us into the HYDROGEN AGE; unfortunately, our present officials including the new SEC. of Energy are unaware of entering the HYDROGEN AGE. Recent statement from DOE indicates thinking that fossil fuel energy will be plaguing us for decades. Instead of wasting time on negative fighting fracking and pipelines, EDF should be talking of the positive action of MAKING THE SUN OUR SOLE ENERGY SOURCE FOR TOTALLY!!!!!!!!CLEAN ENERGY!!!!!!!!!!
I have sent Mr. Krupp and others at EDF statements outlining how to MAKE THE SUN OUR SOLE ENERGY SOURCE. Unfortunately EDF staff seems totally lacking in the science of energy as none seem to understand that the sun is a FOREVER NUCLEAR ENERGY SOURCE THAT CAN PROVIDE ALL THE CLEAN ENERGY WE NEED.
J. Singmaster, Ph.D. UCDavis, 76, Environmental Chemist, Ret, Fremont, CA

I disagree though, regardless of what was mentioned by Keohane, the price is the big factor here, otherwise the problem has been resolve along time ago.

Carbon market is always the big problem, and i agree with the post, "The goal, after all, is to make emissions scarce, not necessarily more expensive.", hope expensive price can control something.

People must be use alternative sources of energy, and stop destroying the Earth.