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Emissions Trading Scheme in Trouble


On 16th April 2013 the European Parliament decided to reject proposals which were needed to save the emissions-trading system (ETS) from collapse. The price of carbon fell by 40%.

The scheme is the world’s largest carbon market, trading allowances to produce carbon which cover about half the European Union’s total carbon emissions. The scheme is administered in Ireland by the EPA through the issuance of Greenhouse Gas (GHG) permits. Partly because of weak industrial demand and partly because the EU gave away too many allowances in the first place, there is massive oversupply in the carbon-emissions market. Prices fell from €20 per t in 2011 to just €5 per t in February 2013.

In an attempt to remedy the situation the European Commission planned to take about 900m tonnes of carbon allowances off the market and reintroduce them in about five years time when, it was hoped, demand would be stronger. This was the proposal that the European Parliament turned down. The main reason that MEPs voted against it was apparently a belief that energy prices for consumers would rise. Undoubtedly a new proposal will be brought before the European Parliament in the short term.

Until a more permanent reduction is agreed then ETS carbon allowances are likely to trade at prices that will not incentivise the reduction of carbon emissions. Therefore our current GHG permitting system in Ireland will have little or no real impact on carbon emissions.