A study, challenging the conventional view that the EU ETS has failed, claims that despite the price of carbon falling to almost zero, the scheme still led to a reduction in greenhouse gas emissions of between two and five per cent against business-as-usual scenarios, resulting in carbon savings of 120m to 300m tonnes during the three-year period between 2005 to 2007. The researchers, at French state bank Caisse des Depots, the Paris-Dauphine University, the Center for Energy and Environmental Policy Research in the United States and University College Dublin, said the ETS had also resulted in a “change of attitude and practice” among participating firms that has had a “profound impact” on the way they now make operational and investment decisions. The study is published in a book titled “Carbon Pricing”.

…whilst the Environmental Audit Committee concludes that it has failed to encourage the necessary investment in low-carbon processes and infrastructure

The EAC published the report "The role of carbon markets in preventing dangerous climate change", on 8 February setting out 19 recommendations to improve the EU ETS and proposals for a global trading scheme. Committee chairman Tim Yeo said: “Emissions trading should be helping us to combat climate change, but at the moment the price of carbon simply isn’t high enough to make it work.” The recession had left many big firms with more carbon allowances than they needed causing market prices to collapse . This in turn has made green investment look much less attractive. Yeo concluded: “If the Government wants to kick-start serious green investment, it must now step-in to stop the price of carbon flat-lining. Ministers should seriously explore the possibility of a carbon tax”. To read the report in full, click here.