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 has 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, 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.

4 responses

  1. I have to agree Nick. The question is really, what effect can consumer offsets have on the market, more than what effect will this have on consumer offsets. It simply provides more incentive for everyday people to get involved. Otherwise, the true cost/price of CO2 would never be realized.

  2. The biggest renegade in this noble cause is the USA ! How can world opinion force them to take a more responsible stance and actively participate in the Kyoto Plan ?
    Their participation would not only firm-up prices of CER’s but also help bring much of the worldwide emissions under better control.
    UH! We all know that !
    It needs a bigger movement to get them roped in!

  3. As a Canadian whose government signed Kyoto in 1997 and ratified in 2003 only to see millions of dollars leave Canada with no benefit to the environment, no plan for meeting any goals or commitments I have much more respect for activity currently taking place at the State level in the US than the political nonsense that is Kyoto.
    What is carbon worth? Good question as we are a carbon based life form. Without it we would not exist. How much is too much?
    I would hesitate to refer to what Kyoto has become as a “noble cause” as the environment is very rarely discussed under the Kyoto banner.
    Maybe a carbon tax would be more effective than the artificial markets that are being developed. Currently with CDM and Russian hot air everyone could meet their commitment with dollars. Unfortunately the environment will be no better off.

  4. First, I’d like to mention that markets, carbon markets included, tend to be cyclical and risk prone. A 50% fluctuation is steep indeed, and is probably as much a result of the newness of the carbon market as any other factor.
    Still, the entire trading scheme makes me wonder…everday millions of tons of carbon are being fixed by forests around the world…carbon that is not accounted for in the current system. Maybe I’m missing something here, but it seems like a community can get their credits certified for carbon that would be fixed anyway…so I’m not really seeing how this offsets anything. I think T. Bittner might be right when he calls it an “artifical market”.

Leave a Reply