I’m sure you’re as gobsmacked as I am that cap and trade in Europe is a failure. Who could have ever conceived a cobbled-together system with massive structural flaws would be exploited, gamed, and rendered useless?
Carbon credits are now so cheap in Europe that companies can easily afford to buy them and just keep on polluting. Far too many credits were issued, driving the price down plus their faltering economies have led to industrial slowdowns, which means fewer credits are needed.
Carbon prices are in a death spiral, at about $4, down from a high of nearly $40.
Traders do not mind big price swings in any market — in fact, they can make a lot of money if they play them right.
But over time, the declining prices for the credits have sapped the European market of value, legitimacy and liquidity — the ease with which the allowances can be traded — making it less attractive for financial professionals.
I’m guessing the whole system was exploited by professional traders who ran circles around whatever feeble safeguards were in place. Now that the price has crashed, they’re off to find new markets to manipulate.