Green projects face carbon credit crunch

Times (UK): Clean technology projects such as wind farms are facing a new threat — a sharp fall in the price that firms pay to pollute. The cost to companies of buying permits allowing them to release waste carbon into the atmosphere has fallen to a third of what it was eight months ago. This makes environmentally friendly projects less attractive compared with schemes that emit more carbon.

This weekend the government was forced to admit that the system was suffering since the price of carbon credits collapsed. It said other incentives would be needed to persuade firms to cut emissions. Ed Miliband, secretary of state for energy and climate change, said in an interview with The Sunday Times: “The carbon price alone is not enough; you also need to provide support for new technologies.” The minister promised to introduce a “stimulus package” for the development of carbon capture and storage within the next few weeks.

Some environmental groups want the government to go further and lead the way in replacing Europe’s ¤67 billion (£59 billion) carbon-trading market — which allows producers of carbon gases to buy and sell the permits to release carbon — with a system of straight taxes on carbon emissions.

…Last year this system looked as though it would work well because carbon credits were trading at more than ¤30 a tonne. However, since the economic slowdown began, demand for credits has dried up as companies reduce their output. Many big companies are now selling unused credits to raise money. As a result they cost only about ¤10 per tonne.

Environmental groups say the price has now fallen too low to encourage firms to use cleaner fuels or technologies. “As the price of carbon credits falls, energy companies will see it as a sign that the cost of coal is superficially cheaper,” said Kirsty Clough from the World Wildlife Fund’s climate-change policy unit. “This runs the risk that they will not switch to gas or invest in renewable energies.”...

A poster for the Laurel and Hardy film, The Lucky Dog (1919/1921). Scanned and uploaded by Rizzleboffin, Wikimedia Commons