In 2012 the global economic crisis was considered the principal cause behind the significant reduction of CO2 emissions throughout the EU. However, a recent report by CDC Climat, a group owned by France’s sovereign wealth fund that conducts climate economics research, ascribes the 1.1-gigaton carbon emissions reduction to the changing preferences on the market for renewable energy resources. Naturally, the financial crisis since 2005 has caused the closure of some industries throughout Europe, which in turn led to the reduction of emissions. Bearing testimony to this, the countries that were hit hardest by the crisis like Spain experienced the most significant reductions. Nonetheless, reduction due to the recession is estimated at 300 million tons of CO2, while that due to the increase of renewable energy resources is 500 million tons of CO2.
The significant reductions have put European countries on track to reach their goal of 20% energy efficiency, 20% reduction of CO2 and 20% increase of renewable energy by 2020. Still, no country is catching up with the timetable for all of the three targets simultaneously. Europe has implemented in 2005 the ETS (EU emissions trading system), which is intended to give incentive to firms to reduce their carbon emissions by creating a market where complying companies earn by selling their unused quotas and noncompliant companies lose money because of the need to buy these quotas.
The upsurge of renewable energies and the consequent fall of their prices resulted in cost efficient alternatives for companies to lower their carbon emissions. Paradoxically, this has affected the efficiency of the carbon market negatively. The former quotas are obsolete and the prices of carbon have dropped since 2009 from 30 euros per ton to 6 euros per ton, rendering the ETS inefficient. This case proves that the initial targets of simultaneously boosting renewable resources and lowering carbon emissions may be untenable and need rethinking.