I never realised just how huge carbon trading has become. From nothing it has become a €84bn business in London. If the US Congress adopts a cap and trade scheme the value of the market could rise to €3,000.
The European Union's Emissions Trading Scheme (the largest cap and trade carbon market in the world) is arguably the cheapest way to encourage carbon emissions. But there are fears that there will be too much price volatility - coupled with political uncertainties . Wild volatility would not provide any useful price signal for investment in life long assets such as nuclear power stations. Trading will be vulnerable to shocks and destroy at a stroke a company's competitiveness. In short it carries risks - huge risks
Would tax be a better way to deliver carbon emission reduction targets?. It offers greater certainty and is easy to administer. Hopefully US Congress will learn from the weaknesses of the European system and hopefully, there will be some changes agreed to cap and trade at Copenhagen in December. Nevertheless, I can't help thinking good old fashioned taxation might have been preferable all along