EU Carbon Emissions Scheme “isn’t working”

So claims a report by Open Europe just out and available here.

It’s a pretty hefty report – but here’s a quote for those with an interest in auctions:

[T]he ETS in phase one was not a real market – instead of auctioning off permits to pollute, member states allocated them free of charge to companies based on how many the government believed they needed. This created severe distortions. Large companies which lobbied for more permits than they needed were able to sell them on at a profit. Other institutions – particularly smaller institutions like hospital trusts – proved less effective at lobbying. They got too few permits and therefore had to pay into the system.

In other words, you would have got a much better result from the scheme if it had harnessed the power of a (well-designed) auction to create the market.

Whether buying or selling, (well-designed) auctions are the best way to allocate goods and services.

See also:

See also EU emissions trading scheme an ’embarrassing failure’, think tank says



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