SINGAPORE — First, came the credit crunch and recession. Now there is a carbon price slump that may undermine one of the main ways governments have chosen to combat global warming. This is happening as Japan, the United States and other advanced economies develop plans for carbon trading based on national emissions targets.
Since 2005, the European Union has pioneered a trading scheme for industrial greenhouse-gas emissions, including carbon dioxide — the main gas blamed by many scientists for warming the planet. The scheme imposes a cap on emissions from factories and power plants that rely on fossil fuels in the 27-nation bloc. It uses a fixed quota of emissions permits.
Firms that lower their emissions by saving energy or turning to nonfossil fuel sources like solar and wind power can sell their permits to less efficient companies. The program was designed to be a major component of Europe's plan to deliver a 20 percent cut in emissions by 2020 over 1990 levels, making it the global leader in fighting climate change.