"“I don’t know a single person in the world that would invest a dime based on ETS signals,” Mr Teyssen declared." Shell Oil has bet big on "carbon capture."
2/14/12, "The linchpin of Europe’s effort to curb global warming is at risk of collapse," Financial Times via CFP, Steve Milloy
"Johannes Teyssen, chief executive of Eon, the German energy group that is one of Europe’s largest, stunned an audience in Brussels last week when he pronounced the market broken. “Let’s talk real,” he said. “The ETS is bust, it’s dead.”
"Upon its launch seven years ago, the market was supposed to work on a simple premise. Proponents hoped that by putting a price on carbon and forcing companies to pay for their emissions, it would prod Eon and others to pour money into green technologies and greater efficiency. But, as a result of a subsequent recession and poor management, the market is saturated – and could be for years to come – with permits that give companies the right to emit carbon without penalty. That has led to a prolonged slump in the carbon price. At roughly €7 per tonne, compared with a peak of nearly €30 in July 2008, it is a fraction of what policymakers and analysts had forecast it would have reached by now – and
well below the levels necessary to justify the desired investments.
“I don’t know a single person in the world that would invest a dime based on ETS signals,” Mr Teyssen declared.
The market has suffered other indignities in its brief history, from value added tax frauds worth billions of euros to the cybertheft of millions of permits from companies’ electronic accounts. But, because it calls into question the fundamental workings of the market itself, the price slide may be its most serious affliction.
“The carbon price is far lower than we estimated it to be when we adopted the whole system,” says Martin Lidegaard, climate and energy minister for Denmark, current holder of the EU’s rotating presidency. “I think it’s fair to say that the situation is not sustainable in the long term.”
Now, a debate is brewing in Brussels about how to fix the market – one that is dividing corporate Europe. On one side stand Mr Teyssen and a coalition of companies that have invested in low-carbon technology, which are lobbying for the European Commission, the EU’s executive arm, to intervene immediately to prop up prices.
One of them is Shell, which has bet big on carbon capture, one of the most ambitious green technologies on the drawing board. Rather than spewing emissions into the atmosphere, companies would capture and bury them. Those plans were hatched under an assumption that carbon prices would reach more than €30.
“There’s no doubt that the investment case for carbon capture and storage is worse if the carbon price is lower, and we may see fewer projects go forward in the future because of it,” says Graeme Sweeney, Shell’s executive vice-president in charge of carbon, who has called for the introduction of a minimum price to give investors greater certainty.
The Commission is considering a plan to set aside millions of permits to help stabilise prices. “To preserve this truly European and cost-effective policy tool, we have to consider and we are considering how to strengthen the ETS,” says Connie Hedegaard, climate commissioner.
But steelmakers and other heavy industries are dead set against intervention. If the system was created to introduce market incentives into environmental policy, they argue, meddling with prices undermines its raison d’être. One industrial lobbyist denounces it as moving the goalposts in the middle of a match."" via Instapundit
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