Just imagine the EU commission wants to change the size of a barrel oil from time to time to manage the fuel economy. Here they use reserves, maybe, as carbon is somewhat closely attached to the oil price developments, why doesn’t Guenther follow that route for the EU ETS? Which brings us back to the central carbon bank thought. Did Guenther already drop that thought? We already discussed a little earlier about that:
http://www.rumoursandfacts.com/2011/06/25/wanted-somebody-competent-to-oversee-the-carbon-market-eu-need-not-apply/

Border adjustment tax could be quite easy with the phase III carbon leakage setup: A prodcom code and the mass of the imported goods needs to be communicated anyways, fumble some carbon compliance ratio over EU produced and imported goods and let both the EU producer and the importer share the carbon compliance costs. In my view if a certain branch claims carbon leakage status but the EU does not import any of these units there is no reason why this certain branch should not be expelled from the CL list and face the steep carbon reduction path. The same mechanism could be used for exported goods from the EU, just detach the carbon costs by tax refunds and make EU products harshly competitive worldwide.

Benoit btw talks about the three most discussed options for signal confusion in the latest carbon trading magazine: reserve price on auctions, set aside or do nothing. Rumours believes the more talk happens the less likely is any action. As in the famous ‘Yes Minister’ series, trialogues, working groups, informal meeting may most likely be held not to make decisions, but rather to postbone them.

Yep, ready for another ouzo in the mean time..

The point of this post was that there are two understandings of the scheme – a purist one where the cap is the key and the promotion of one technology or another is not politically important; and a technologist view which wants to see the EU ETS stimulating investment in specific technologies. And that explains why some people say the price is too low and others say it doesn’t matter what the price is.

Compliance coefficient – like the way interest rates get changed from time to time to manage the economy. But if it’s too complicated for people, then it’s probably no use. I expect Gunther was thinking about it because he thought people would get used to it and start to like it.

I do like the border adjustment (although that also might be fairly complicated, mind). It might be as controversial as extending our borders to every airport on the planet!

No doubt that your commercial heart would fancy a high carbon price, higher margins, better argumentation for renewable energies, better awareness of renewable energy and energy efficiency measures at the industrial and utility side. But what do you creed for? Purest techno uncertainty to fortify a consultants role?

But didn’t you recently argue that a low carbon price is a signal for well working cap and trade scheme? And wouldn’t Guenther agree, that in a perfect carbon world, a low carbon price would mean that the EU ETS cap will be easily met? Couldn’t fellow Guenther then reduce the financial committment to other EU carbon instruments because the EU ETS overperformed and the other instruments do not face the full emissions reduction burden as initially planned? Lets call it communicating vessels. Heureka!!

And that nice compliance coefficient, what the heck is this concept about? Why does Guenther even think about that? Easily the system will go down the drain when you make it more and more complicated. A ton carbon is a ton carbon is a ton carbon. Full stop. And in rumours view it should stay like that.

Discuss timings and volumes of EUA auctioning for the power sector, probably discuss an annually revolving cross sectoral correction factor for fine tuning of the free allocation for the other industrial sectors or bring in ambitious carbon benchmarks for production of goods. No special law, decision or polish affirmation whatsoever needed because these valves have been installed already in the directive. And, go for a border adjustment tax for all goods on the carbon leakage list coming from outside the EU to prevent our industrials from leaving.

Ok, I do fancy a nice cold german beer right now, hopefully the EU ETS will not close all the german micro breweries down. Cheers!

The only reason why the recession might be relevant is that it might be the best way to cut emissions. I mean: spending more time gardening and less time rushing around.

I like your story: The current low carbon price is just that the ETS is doing a good job in meeting an emission cap at low cost. In that sense the market is doing its job. Of course the recession is helping a bit, but that is not so relevant. But a next step should be that a low carbon (=compliance) cost should make is easier for politicians to seel deeper targets to the voters during a next period. Unfortunatly that is not happening with the recent veto of Poland ….