21 Dec 2007

Watch the price of carbon!

Daniel Gros

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The agreement reached in December 2007 at Bali aims make it easier to reach a new accord on limiting CO2 emissions once the Kyoto Protocol expires in 2012. In this new Commentary, however, CEPS Director Daniel Gros warns that an important change in the relative prices of oil and coal in recent years will actually make it more difficult to achieve meaningful reductions in CO2 emissions. The key fact that the price of coal has fallen considerably relative to the price of crude oil will encourage the substitution of a hydrocarbon (oil) with pure carbon (coal), thus increasing the carbon intensity of energy use.