Environmentalists and green bureaucrats have watched in shock as the coronavirus global shut down has now caused carbon credit markets to crash.
The European Union’s carbon credits price has fallen by 40% this year so far. This market was worth $215 billion last year, according to Bloomberg Environment. The price drop has rubbed out two years of EU carbon market gains.
It turns out that if there are extremely low levels of carbon dioxide emissions, as is the case currently with businesses and industries shuttered, the companies doing the carbon emitting don’t have to buy any carbon credits to make up for it.
And if no one is buying carbon credits to offset emissions, well, then the so-called “market” for carbon dies.
Wait a minute, isn’t the whole idea of these carbon credits to reduce CO₂ emissions; what climate campaigners refer to as horrible pollution?
As Luke Skywalker said when approaching the Death Star for the first time in Star Wars Episode IV: A New Hope, “I have a very bad feeling about this.”
How is it then that if the ultimate goal of near zero CO₂ emissions is achieved, the long-coveted carbon credit market crashes?
Quite plainly, it is because the existence of these markets sets up a perverse incentive.
To the average climate campaigner, the goal of such a “market” is to eventually bring CO₂ emissions to as close to zero as possible. But for those companies making big bucks off of carbon credits, when the so-called “pollution” falls, so do their profits. They don’t plan on giving that cash flow up any time soon.
Until recently, climate activists have been very successful convincing corporations and governments into going along with the scheme of “carbon credits.” This means, essentially, the more CO₂ you emit, the more credits you have to buy. The cost of those credits is then supposedly invested into renewable energy projects, etc.
But the real goal isn’t to reduce CO₂ emissions at all.
The real goal is to make money.
Whatever good, yet misplaced, intent there is in climate action policies has been completely hijacked by those who see money making opportunities – and not in a way that encourages innovation through free market capitalism, but by creating schemes like carbon credit markets that siphon funds off of legitimate businesses and redistributes them to companies and individuals with the right connections in government.
You can’t claim to have a free market solution to something with a faux market only put in place by mandating government regulations.
A faux market is all carbon credits, carbon taxes, carbon pricing, carbon transfers, or whatever you want to brand them, will ever amount to.