The EU’s Emissions Trading Scheme (ETS) was set up to help companies reduce their carbon emissions. Under the plan, polluting companies are granted tradable emissions allowances, thereby enabling heavy polluters to buy additional allowances from those that have cut their emissions.
Analysts have suggested that companies are flooding the European carbon market by cashing in emissions allowances to raise operating funds, rather than to provide environmental benefits. Almost 3 billion euros (US$4 billion) worth of allowances have been sold since the beginning of December 2008, driving the carbon price down by almost 30%.
A 60% plunge in prices since July 2008 is thought to be driven by a decline in industrial activity. Lower emissions as a result of that decline mean lower demand for carbon allowances.
The commission said the EU should work to build a carbon market across the developed markets of the Organisation for Economic Cooperation and Development (OECD) by 2015, by linking the ETS with other comparable systems.
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