Nature of Carbon Markets

I just started looking at it and came across this somewhat dated but fascinating article.

A collapsing carbon market makes mega-pollution cheap

As recession slashes output, companies pile up permits they don't need and sell them on. The price falls, and anyone who wants to pollute can afford to do so. The result is a system that does nothing at all for climate change but a lot for the bottom lines of mega-polluters such as the steelmaker Corus: industrial assistance in camouflage.

I need to study this a bit more. It doesnt strike me as being fundamentally problematic if polluters dont get to hoard these permits indefinitely. Atleast superficially, the fall in prices is due to reduced demand, i.e., reduced output. If the gap between demand and available credits is not high enough (say 100 & 95 units instead of say, 100 & 70 units), it might make more sense for companies to wait to take advantage of regular market fluctuations, e.g., a company going bankrupt, instead of investing in alternatives. Thats seems to be the point the article is making. Now the question is whether people and companies would let the policy makers create higher scarcity to create stability in the price of carbon. Regulatory capture to some degree or other is the norm.

Other questions were raised about the whole issue of whether we really trust the credits being offered or not. This is an overview paper:

Accounting and the environment

Introducing a discussion of some of the ways in which accounting and other calculative mechanisms are involved in environmental matters, the article focuses on a number of questions that emerge from accounting for carbon emission permits and corporate environmental reporting. Both are areas where there is already a need for more research and where that need will increase in the coming years. Identifying some of the interests and pressures that already influence approaches in the area, the case is made for the need for both critical and facilitative research.