EU Carbon Market Crashes – Is This Good or Bad?

Carbon prices are down a whopping 50% over news that many European countries emitted far less CO2 last year than the market had anticipated (article on WBCSD). While it’s good news that emissions are down, the immediate negative effect, of course, is that with lower prices for credits, companies have less incentive to cut back and sell them. Of course, as long as a credit is worth more than zero, there’s still something there no? Cutting emissions is usually profitable in the long term regardless of whether there’s an incentive program in place, but could this reduction in incentives be too much to keep companies excited about it?
What will the effect of this be on projects like TerraPass or DriveNeutral? (if something similar happened in the US market?) It seems to me that if consumers were picking up the slack and buying lots of credits to offset their driving, it would make up for the difference and stabilize the price.

Nick Aster is a new media architect and the founder of TriplePundit.com

TriplePundit.com has since grown to become one of the web's leading sources of news and ideas on how business can be used to make the world a better place.

Prior to TriplePundit Nick worked for Mother Jones magazine, successfully re-launching the magazine's online presence. He worked for TreeHugger.com, managing the technical side of the publication for 3 years and has also been an active consultant for individuals and companies entering the world of micro-publishing. He earned his stripes working for Gawker Media and Moreover Technologies in the early days of blogging.

Nick holds an MBA in sustainable management from the Presidio School of Management and graduated with a BA in History from Washington University in St. Louis.