The EU Commission today released a report on the state of the Emission Trade System, and a FAQ explaining it.
According to the FAQ, the EU is doing too good a job on reducing CO2 emissions, mostly because of the 2008 worldwide economic crisis.
That is good news for the climate, but bad news for the prices of carbon permits.
The sensible thing to do would be to greatly reduce the number of permits in the system permanently. That is not what the Commission wants to do.
They want to “backload” the auction of 900 million tons of permits to the last two years of the third phase (2013 to 2020). If these permits are not in play in the early years, that is expected to raise market prices.
I guess that is better than nothing.