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Central Banks (huray!) for Carbon (booo…)

November 15, 2010

From Bloomberg.  

The U.K.’s proposed Green Investment Bank considered setting a long-term price for emission allowances by sharing some of the market risk, according to the global head of carbon markets at Bank of America Merrill Lynch.

“There was discussion on the advisory panel about the potential role of the Green Investment Bank in underwriting a long-term carbon price,” Abyd Karmali, managing director at the bank, told delegates at the Climate Finance 2010 conference today in London.

Prime Minister David Cameron’s administration is now considering a minimum price for CO2 emissions to underpin investment in cleaner energy when the cost of European Union permits falls below a certain level. That would raise costs for power from plants fired by coal and natural gas, which are cheaper and quicker to build than atomic reactors.

So more details emerge. Interesting that we appear to be moving closer to market intervention in the EU ETS to ensure appropriate investment levels. This is not at all unlike the money markets, which are intervened into by central banks to achieve appropriate levels of investment. I find it funny how people who have no qualms with their respective central bank doing its job in money markets suddenly freak and start shaking their head when you propose a carbon price collar enforced by a central carbon bank.

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