ETS

In the wake of the weak climate agreements reached in Copenhagen a little over a week ago, the price of carbon has dropped substantially. The main exchange for the carbon emissions allowances that are traded as part of the European Union’s Emissions Trading System saw carbon dioxide emissions drop to €12.4 ($17.90) a metric ton Monday.

Prices have been volatile throughout the ETS’s first five years. Permits had reached a high of €30 ($43) in summer 2008 before dropping to €8 ($12) earlier this year.

On the other side of the Atlantic, the U.S. House of Representatives passed a climate change bill in June based on creating a similar cap-and-trade system. Like the ETS, the proposed U.S. system would limit industries’ emissions and eventually force companies to pay for allowances to offset their emissions — or allow them to sell excess allowances if their emissions are lower than expected.

The fact that prices for those allowances are so low in the cap-and-trade systems that already exist might be troubling for proponents of such a system’s ability to mitigate climate change.

Part III of a three-part series on cap-and-trade looking at the successes, failures and lessons the U.S. government can learn from three programs already in place.

The European Union’s Emissions Trading Scheme creates a common market for trading permits to emit carbon dioxide in 27 countries and puts a price on carbon emissions. But the 5-year-old program isn’t flawless, and critics question whether it’s powerful enough to meaningfully affect global climate change.