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The Trouble with Low Carbon Prices

California flagCalifornia’s cap-and-trade system could end up facing a similar problem to Europe’s: too-low carbon prices.

A Point Carbon report finds that California’s greenhouse gas output is already lower than the cap the state set for 2015, and that the state will remain below the cap until at least 2017. This will push down prices, with allowances reaching only $15 in 2020. (In last month’s auction, emitters paid a lower-than-expected $12.22 per metric ton.)

Low carbon prices are nothing new. Europe has suffered from this problem for some time and lawmakers there are desperately trying to prop up the system. California officials saw what was happening in Europe, and tried to avoid the same fate by creating a price floor that rises over time, SFGate reports. But because of the current steep decline in emissions – in itself a desirable outcome – prices are likely to remain at or near the floor for years to come, reducing the incentive for companies to further cut emissions.

Tamar Wilner is Senior Editor at Environmental Leader PRO.

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