EU Carbon Trading Not Cutting Carbon

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Business week reports that despite the acclaim of Europe’s climate-change policies, they aren’t actually cutting carbon.

While the EU’s Carbon-Trading policies allow companies to buy and sell permits, the number of those permits is not actually being reduced. But because governments can tout the job creation, business development, and energy security benefits of renewables; and industry has lobbied for a flood of cheap permits - nobody has an incentive to change things.

Green Party officials in Germany, however, are starting to discuss the fact that issuing carbon credits - while creating a market - does not reduce carbon. They point out that despite its many benefits, investing in renewable energy is not the most cost-efficient way to cut carbon. Retrofitting buildings, for instance, would do more to reduce carbon emissions than building windmills.

But until governments and industry are willing to reduce the number of credits and drive up the cost to where investing in cleaner behavior is cheaper than buying permits to pollute, the climate will continue to get warmer.

Last December, a GAO report found that Europe’s cap-and-trade system had created “a functioning market for carbon dioxide allowances, but its effects on emissions, the European economy, and technology investment are less certain.”