EU ETS is a „betting shop for policy“

Interviewed by the magazine BIZZ energy today MCC director Ottmar Edenhofer explains why the annual EU emissions are currently above the cap of the ETS and refers to a recent MCC study: "At the MCC we have analyzed this in detail through a comprehensive econometric test. Our conclusion is this: Only ten percent of the price drop can be explained by market fundamentals like economic shocks, development of the renewables or additional CDM certificates from developing countries."

Furthermore, Edenhofer, who also is the Chef Economist at the Potsdasm Institute for Climate Impact Research, proposes a minimum price for emissions trading. "It would be a fixed minimum so that investors could calculate the return of their projects in advance. It signals that a surplus of certificates is not that important because this supply surplus can not beat the price below the minimum."He also explains how a carbon central bank could stabilize investors' expectations and why the reduction of emissions has become a top priority for the government in China.

You can access the web article of BIZZ energy today here.