Then European Union Commissioner for Environment Stavros Dimas gestures during a press conference on a "Stronger Carbon Market to Combat Climate Change" at the EU Commission HQ in Brussels, Nov. 9, 2006.
AP Photo

"Don't Write Off Cap and Trade"

Magazine or Newspaper Article, China Dialogue

June 26, 2012

Author: Robert N. Stavins, Albert Pratt Professor of Business and Government; Member of the Board; Director, Harvard Project on Climate Agreements

Belfer Center Programs or Projects: Harvard Project on Climate Agreements

Various journalists and advocates have, of late, described America's Regional Greenhouse Gas Initiative (RGGI) as being near "the brink of failure" thanks to the trend of very low prices of permits to emit carbon dioxide. Likewise, commentators have claimed that Europe's carbon market, the European Union Emission Trading Scheme (EU ETS), may be "sinking into oblivion" because its emissions allowances too have become very cheap.

Since when are low prices considered a problem? To understand what's going on, we need to remind ourselves of the purpose—and promise—of a cap-and-trade regime, and then look at what's been happening in the respective markets....

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