Adelaide Advertiser
Monday 2/2/2009 Page: 9
CARBON trading is at risk of becoming the next "sub-prime" investment, European leaders have been warned. Some companies have been cashing in their emissions trading scheme carbon credits, obtained for free, causing the global price of carbon to plunge by more than half. This has been compared to the sub-prime home loans, largely blamed for triggering the current global recession.
The emissions trading scheme was created to tackle rising industry greenhouse gases, with pollutant companies able to trade their permits with other companies and countries in a move designed to encourage fewer emissions. But the world-wide recession has led to a drop in production and therefore lower carbon footprints for companies prompting some, particularly in the metals industries, to cash up by selling their carbon credits. Hedge funds are now trading unwanted carbon credits creating an artificial stock and price.
French-owned gas and electricity group EDF Energy chief Vincent de Rivaz said some certainty had to be brought into the scheme if it was to work. "We are at the tipping point where we should wonder if we have in place the right balance between government policy, regulator responsibility and the market mechanism which will deliver the carbon price," Mr De Rivaz said.
"The carbon price has to become simple and not become a new type of sub-prime tool, which will be diverted from what is its initial purpose - to encourage real investment in real low-carbon technology." A spokesman for Climate Change Minister Penny Wong said carbon prices were affected by many factors, including overall economic activity. "As there is not yet a carbon market in Australia, a low carbon price in the EU does not have immediate ramifications here," she said.
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