The idea behind cap-and-trade carbon dioxide emissions trading schemes is that auctions will set a price on emissions that will encourage the development and deployment of low-carbon energy technologies as a way to protect the climate. However, current prices are so low that nobody is really taking them into consideration as they plan their capital and input energy strategies. For example, the price for a ton of carbon dioxide in the Regional Greenhouse Gas Initiative market that encompasses most northeastern is hovering around $4.50. Over at the European Union market, carbon dioxide emissions permits go for just a bit over $5 per ton. Interestingly, the price in the California market is about three times higher at $12.71 per ton. Why are prices so low? As University College London analyst Michael Grubb explained to the Straits Times:
"Governments have set inadequate targets due to lobbying pressures and because they didn't think carefully enough about overlapping efforts. That has destroyed investor confidence that carbon prices will rise."
It's almost as though politicians fear that raising the price of electricity and transport fuel is not popular with their constituents.
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