The European Union’s cap-and-trade system to reduce CO2 emissions, introduced in 2005, seemed to be working quite well.
With limits set on pollution, companies that pollute less sold permits to companies that want to pollute more, at a price that, ideally, would keep rising, thus increasing the incentive to go green.
But now the price is not rising. In fact, at €9.30 a tonne, it now stands at barely a third of its level one year ago. As factories slow down, demand for emissions permits slumps. On top of that, the market has been flooded with permits from businesses desperate for more liquidity.
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