Can Europe save the carbon market?

Australia’s move to get rid of the floor price and link with the EU leaves us broadly in the same place – with a weak and uncertain carbon price unable to drive a clean energy transformation. But there is bigger upside, provided Europe can clean-up their huge surplus of emissions allowances.

The announcement by Minister for Climate Change Greg Combet to drop the $15 floor price and reduce the use of international carbon credits known as CERs (Certified Emission Reduction) still leaves Australia in pretty much the same place – a weak and highly uncertain carbon price. However the potential carbon price upside is far greater under these new arrangements.

The extent of the upside is driven by European policy settings as well as whether Europe can pull itself out of its current depressed economic conditions.

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