If I could get a nice looking plaque along with that metric ton of carbon dioxide, I’d be tempted. My little bit to hamper the EU economically.
Ignoring whether a carbon emission credit market is a good idea in the first place, this outcome illustrates the dangers, yet again, of poor market design. When you have a hard cap on allowances for a vital economic activity then there’s two states 1) where the cap is high enough over volume that the price of allowances is dirt cheap, and 2) the inelastic singularity (and plush playground for market manipulators) that you hit when you exhaust the supply of the allowance.
As I’ve noted before, you can fix this with a soft cap. The market can buy more and more of the allowance at an increasing cost (in theory somehow near equal to what the actual externality of the activity would be). Then low volume isn’t dirt cheap (providing some modest incentive even at these levels to generate less carbon dioxide which certain parties should like) and high volume doesn’t run into a wall that disrupts your nation’s economy. Nor do market manipulators have an easy, predictable way to rob businesses that really need to generate carbon dioxide in order to function.
As an aside, price supports for carbon dioxide emissions is a remarkable sort of economic suicide. You’d have to be pretty far gone to vote for that.
If I could get a nice looking plaque along with that metric ton of carbon dioxide, I’d be tempted. My little bit to hamper the EU economically.
Ignoring whether a carbon emission credit market is a good idea in the first place, this outcome illustrates the dangers, yet again, of poor market design. When you have a hard cap on allowances for a vital economic activity then there’s two states 1) where the cap is high enough over volume that the price of allowances is dirt cheap, and 2) the inelastic singularity (and plush playground for market manipulators) that you hit when you exhaust the supply of the allowance.
As I’ve noted before, you can fix this with a soft cap. The market can buy more and more of the allowance at an increasing cost (in theory somehow near equal to what the actual externality of the activity would be). Then low volume isn’t dirt cheap (providing some modest incentive even at these levels to generate less carbon dioxide which certain parties should like) and high volume doesn’t run into a wall that disrupts your nation’s economy. Nor do market manipulators have an easy, predictable way to rob businesses that really need to generate carbon dioxide in order to function.
As an aside, price supports for carbon dioxide emissions is a remarkable sort of economic suicide. You’d have to be pretty far gone to vote for that.