Oliver Tickell is a strange bloke, isn’t he?
But the carbon market also has to provide a secure, long-term price signal if it is to attract private investment in clean energy infrastructure on the scale we need – and the current carbon-price yoyo is failing entirely in this respect. Wild fluctuations create a risk that deters some investors altogether and makes others demand a significant risk premium, putting up the price of capital. We therefore need to create a floor price for carbon within the European trading system at which the EU will buy back allowances and so underpin the market. This floor price needs to be high enough to pitch the investors’ preference away from coal and gas and towards renewables.
Ideally there would also be ceiling price at the top end to prevent damaging price spikes which can cause economic damage while doing nothing to encourage long-term investment.
We need a market in carbon but we don’t want to have the prices which that market reveals to us?
Not much point in having a market then, is there, if you’re going to ignore what information said market reveals. Why not just set the price of the permit?
That is, let’s have a carbon tax, not cap and trade?