Carbon trading isn’t stimulating the spending on renewable energy needed to cut emissions quickly, Engel said today in a debate on the future of the European Emissions Trading System in Copenhagen. He cited Nobel Prize-winning economist Joseph Stiglitz to justify his call for a tax, which Danish Environment Minister Martin Lidegaard immediately said won’t be possible.
“If there’s something you want less of, tax it,” Engel said. “It’s a simple way to make things happen. If you put a tax on carbon, it will work.”
The ETS is the cornerstone of EU climate policy, imposing emission curbs on more than 12,000 carbon-emitting factories and power plants. EU emission permits have fallen to a record low this year amid concerns there are too many permits. Denmark, the current holder of the rotating EU presidency, is hosting a meeting of energy and environment ministers this week in Horsens to discuss the need to improve the system.
“The idea of putting a global carbon tax in place I think it’s a wonderful idea, but I hate to be the messenger to tell you that it won’t happen,” Lidegaard told Engel. “We can’t get a carbon tax through.”
Denmark said earlier this month that a decline in emission costs casts “some doubt” on the ability of the program to promote investment in low-carbon technologies.
“One of the biggest problems is the unpredictable behavior of the ETS,” Engel said. “When companies don’t understand the game, they keep back on investment.”
EU carbon permits for December today rose as much as 2.8 percent to 7.37 euros a metric ton on the ICE Futures Europe exchange in London and were at 7.31 euros as of 2:50 p.m. The contract has lost 60 percent in the past year, falling to a record low of 5.99 euros on April 4 on concern that the ETS will be oversupplied for most of the next trading period from 2013 to 2020.
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