Price of Carbon Credits Rises In Europe, Which is a Good Thing

Whatever your thoughts are on trading carbon credits to reduce the levels of heat-trapping emissions, European leaders think they are making progress. Long criticized as being ineffective because the price of credits was too cheap and the cost of exceeding compliance rates was too low, the program is now evolving.

Carbon prices have risen nearly 7 percent since December, reports Bloomberg. The price is now about 7 Euros per metric ton.

A cap-and-trade program allows companies to buy and sell credits amongst themselves. Those companies that are exceeding emissions limits can sell credits to those that are unable. As the ceiling is gradually lowered, pollution rates fall. About 12,000 units owned by manufacturers and utilities are eligible to trade credits on the continent.

To be effective, though, the price of credits has to be high enough to encourage those manufacturers and utilities to install pollution controls. Otherwise, they will find it cheaper to just buy credits rather than make expensive retrofits. Since 2008, the price of credits been exceedingly cheap in Europe, giving critics of the cap-and-trade program lots of fodder.

“There seems to be a growing number of countries dissatisfied with the low EU allowance price,” Espen Andreassen, a carbon analyst for Markedskraft ASA, told Bloomberg. Proposals to deal with oversupply in the market are probably helping drive prices higher, as well as the yearly compliance deadline on April 30, the news outfit reported.