There is good news and bad about global climate policy
The carbon price needs to rise, and it will, but distorting the capital market could scupper it all
There’s good news and bad news in humanity’s struggle against climate change. What’s good is that we have an excellent instrument against global warming that we can extend and improve: a market-friendly carbon price. What’s bad is that we seem bent on gumming it up with other policies that are faddish but misguided, and amount to a new form of central planning.
Let’s start with the good news. The price of carbon allowances being traded in the EU’s emissions trading system (ETS), which is by far the world’s largest, has been soaring and now hovers around €50 per tonne of carbon-dioxide equivalent. The reason is high demand from industrial polluters as well as hedge funds and banks that speculate in these permits...
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