Carbon permits: The burning issue

Carbon floor price or free market? Europe's debate shows no signs of calming

For more than a decade Europe's carbon market has been at the centre of a debate on whether a trading emissions system is more effective than taxation. Even as ambitious efforts to reform the EU Emissions Trading System (EU ETS) near completion, critics say setting a floor price for carbon would lead to greater reductions. Since 2007, the EU ETS built up an oversupply of EU allowances (EUAs) that at its peak was around 2bn tonnes, or the equivalent of a year's worth of emissions from the entire market. Prices plunged from nearly €30 ($/35.39) per tonne in 2008 to €2.46/tonne in April 2013, leading many critics to claim that low prices had removed all incentives to cut climate pollution. The