EU ETS on the ropes

The EU declined backloading, a deferral of permit auctions that would have supported prices in the Emissions Trading System (ETS).

This is described imminent collapse to the system, threatening the achievement of emissions targets. Perhaps a political collapse is imminent – not my department – but the idea that low emissions prices threaten the system is a bit odd. The ETS price is a feedback mechanism. Low prices are a symptom, indicating that the marginal cost of meeting targets is extremely low. That should be a cause for celebration (except for traders).

For the umpteenth time, this shows the difficulty of running a system that invites wrangling over allocation and propagates noise from the economy into a market.

Meanwhile, carbon taxes grind away at their job.