Ikhlasul Amal /<a href="http://www.flickr.com/photos/ikhlasulamal/4224417899/in/photostream/">Flickr</a>
“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).