European Carbon Market Crash

smokestacksEuropean carbon prices are collapsing, wiping out 50 percent of the value of carbon credits over the past week. The EU carbon trading system sets a cap on total carbon dioxide emissions and requires companies to have carbon credits for their emissions. Governments are reporting their actual emission levels for the first time, and it appears that initial carbon emission allocations to member countries were too generous, resulting in a surplus of credits to be traded. The situation illustrates that while carbon markets have a role in addressing climate change, they can be volatile and may have been oversold. More emphasis needs to be given to carbon taxes, as well as energy efficiency, conservation, and renewable energy.

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