Sunday, November 15, 2009
Carbon Credit Trading
The trading of carbon credits in Europe is a very promising instrument to cap the output of CO2 emissions. The European Union Emissions Trading Scheme (EU ETS) is a cap-and-trade system that has an absolute limit on covered emissions and rights to emit those emissions are conveyed by tradable permits (called European Union Allowances (EUAs)). These allowances are bought and sold via online auctions. Recent research by the MIT Joint Program on the Science and Policy of Global Change shows that the European Emission Trading Scheme is working successfully. Denny Ellerman and Barbara Buchner concluded in 2008 that - based on the first 2 years of the first trading period - CO2 emissions were about 3% lower than the allocated allowances.