Despite the substantial momentum of countries using emissions trading to tackle climate change, carbon markets have promised a lot and delivered little, says Seb Henbest of Bloomberg New Energy Finance (BNEF).

In an essay published on BNEF’s site, Henbest, BNEF’s head of EMEA, said carbon markets are underperforming almost everywhere, with carbon prices equivalent to just a fraction of the projected emission costs of climate change and well below levels needed to drive material shifts in the energy system.

He said this nowhere was this more true than for the EU ETS, where current prices of €7 are far from the €42 level needed to encourage German utilities to switch from burning coal to cleaner gas.

Without further reform, it could take at least nine years for the market’s 2.2 billion permit surplus to clear, and it looks “very much like” reformers have the numbers required to pass the MSR and expects major decisions to be made before the end of May.

“The best thing about the MSR is that it should actually work… (it) will almost certainly result in carbon prices sufficiently high to achieve the policy goal for which they were designed, namely shifting Europe off its high-carbon diet… very likely over €30.”

He added that such a reform would be enough to revive private sector confidence in carbon markets worldwide, above any UN climate deal that can be agreed in Paris in December.

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