Cameron Hepburn

2 August 2007

Lightly carbonated – The Economist

Cameron Hepburn

European companies are not yet taking full advantage of carbon markets

IT SOMETIMES seems that plans for emissions trading are piling up even faster than the greenhouse gases they are designed to curb. In late July the first emissions exchanges in Australia and Canada opened, in anticipation of mandatory carbon-trading schemes in both countries. America already has a healthy voluntary carbon market, and will soon add an obligatory one for utilities in certain states. But the evidence from the most advanced such “cap-and-trade” programme, the European Union’s Emissions Trading Scheme (ETS), suggests that companies are struggling to make the most of carbon markets.

Nonetheless, a reluctance to trade allowances, whether driven by timidity or prudence, adds to the overall cost of emissions abatement. Despite misgivings about brokers keen to drum up clients for complicated transactions, Cameron Hepburn, an academic at Oxford University, agrees that most firms should pay more attention to emissions trading. “The faster they do,” he says, “the quicker we’ll have an efficient carbon market.”