Carbon markets were supposed to help the world fight climate change by making fossil fuels more expensive, thereby curbing the burning of coal, oil, and natural gas, which release carbon dioxide into the atmosphere. This year, the market is pricing a lifetime of pollution at less than the cost of a tank of gasoline. Using one type of United Nations carbon credit, in January it was possible to offset 581 tons of emissions, about as much as the average European generates in 80 years, for €23.24 ($30). The price has climbed to $82. “The fact that prices are so cheap says the market is broken,” says Edward Hanrahan, director of ClimateCare, in Oxford, England, which invests in carbon-reducing projects. “It’s not spurring large emitters to make investments” in reducing emissions.
Carbon markets were set up to help developed countries meet the emissions targets they agreed to under the 1997 Kyoto Protocol. The idea is to issue factory owners and utilities permits for a certain amount of pollution, with a declining number of permits issued each subsequent year. Companies that don’t use all their allowances can sell them to companies that exceed their limits. There are also markets like the UN’s Joint Implementation program, where companies can buy carbon “credits or “offsets” to help meet their emissions quotas. The money they spend on credits is invested in UN-approved emissions-cutting projects.
