Dave's Part: Carbon Trading Perverse Incentive To Burn While Rome Fiddles?

Dave Osler was stunned to read a piece in the Financial Times yesterday, revealing that the system has actually become a perverse incentive to increase pollution:

’The price for a permit to emit one tonne of carbon dioxide has plummeted to a record low of just €1.50 ($1.94) a tonne - a fraction of the peak €30 level hit last April.

‘Chris Rogers, utility analyst at JPMorgan, says that at current prices it is far cheaper for utilities to burn coal - and buy the emissions permits that allow them to pollute - than it is for them to buy cleaner fuels such as natural gas.

‘He estimates that a utility can buy coal that is €10 per megawatt hour cheaper than gas.

‘"There is no economic incentive for users to import less coal than they did last year," he says.’

As Dave himself concludes: The story is further evidence that, when it comes to saving the planet, the free market is more likely to prove part of the problem than part of the solution.

PICTURE: Europe's Worst Culprit Drax from The Daily Telegraph.