In evaluating Europe’s cap-and-trade system, it’s important to distinguish means (a carbon price) from ends (carbon reductions). Europe’s carbon price is low in large part because a prolonged recession and complementary policies have reduced fossil-based energy demand and, in turn, demand for carbon allowances. The carbon market, in other words, has adjusted to the current economic reality, just the way a market should.
Despite low carbon prices, Europe is on track to outperform its carbon emissions targets for 2020. Indeed, Europe’s carbon intensity (emissions per unit of gross domestic product) is about a third lower than that of the United States, and Europe’s per-capita emissions are roughly half ours.
Europe’s experience provides important lessons for those introducing carbon pricing systems elsewhere. The key lesson is to refine — not abandon — this market-based approach.
Eileen Claussen, Arlington
The writer is president of the Center for Climate and Energy Solutions.